BLBG: Oil Drops to Six-Week Low as Dubai Debt Delay Rattles Investors
By Grant Smith and Ben Sharples
Nov. 27 (Bloomberg) -- Crude oil tumbled to a six-week low as Dubai’s attempt to reschedule its debt prompted investors to sell commodities.
Oil dipped below $73 in New York as the dollar jumped, dulling the appeal of crude as a currency hedge, and equities fell. Dubai World, the government investment company burdened by $59 billion of liabilities, sought to delay repayments, raising concern worsening defaults may hold back the global recovery.
“It’s the Dubai surprise,” said Thina Saltvedt, a commodities analyst at Nordea Bank AB in Oslo. “It’s the flight to safety on all the uncertainty over the turmoil in Dubai. Until we get more information we’ll probably see a sell-off in risky assets.”
Brent crude oil for January settlement fell $1.47, or 1.9 percent, to $75.52 a barrel on the London-based ICE Futures Europe exchange at 9:28 a.m. London time. Earlier, the contract plunged as much as 4.3 percent to $73.70.
On the New York Mercantile Exchange, where markets didn’t settle yesterday because of a public holiday, January U.S. crude futures were trading at $74.36 a barrel, down 4.6 percent from the closing price on Nov. 25.
The U.S. currency traded at $1.4905 per euro at 9:31 a.m. in London, from $1.5019 yesterday. Gold fell for a second day, dropping as much as 4.2 percent to $1,138.10 an ounce.
The MSCI Asia Pacific Index slid 3.3 percent to 113.74 as of 5:02 p.m. in Tokyo, the biggest drop since Aug. 17. Banks were the biggest decliners. HSBC Holdings Plc, Europe’s largest lender, tumbled 7.6 percent to HK$87, while Standard Chartered Plc sank 7.5 percent to HK$187.70.
U.S. crude oil stockpiles rose 1.02 million barrels last week to 337.8 million barrels, a Nov. 25 Energy Department report showed. Distillate supplies fell 0.3 percent to 166.9 million barrels, according to the data. U.S. gasoline inventories increased 0.5 percent as imports rose and refiners boosted output, the report showed.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net.
