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Crude Oil Drops Further As Investors Asses Potential Dubai Fallout

30th Nov 2009, 3:15 pm Crude Oil Drops Further As Investors Asses Potential Dubai Fallout

Crude oil prices fell a further 1% this morning, returning to $75 per barrel and look set to finish the month on a low note.


Throughout most of the month the weak dollar continued to support the oil price above $80 despite increasingly bearish inventory data. However last week, concerns over the potential fallout should Dubai World default on its debt sent crude oil down sharply.


Both equities and commodities came under pressure at the end of last week, as news that state owned Dubai World had delayed its debt repayment obligations. Many economists expect the neighbouring Emirate state of Abu Dhabi to bail out Dubai; over the weekend the UAE central bank said it would stand by the stricken Emirate.


However many of the world’s major institutional investors and central banks hold the Emirate state’s sovereign debt and the potential fallout of any default remains unclear. Both bulls and bears will be keeping tabs on developments as they emerge in the last few weeks of 2009.


Most major oil and gas stocks were in decline this morning. Supermajors BP (LS:E BP) and Shell (LSE: RDSB) shed 1.3% and 1.7% respectively, while Tullow Oil (LSE: TLW) also lost 1.7%. Petrofac (LSE: PFC) was down 1%, while Cairn Energy (LSE: CNE) declined marginally.


BG Group (LSE: BG) led the sector in the FTSE 100 with a 2% advance.


Midcaps followed with Dana Petroleum (LSE: DNX) and Heritage Oil (LSE: HOIL) sliding 1.5% and 1% respectively, while Dragon Oil (LSE: DGO) declined marginally.


Juniors didn’t show much movement in early trade, but Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) was one of the top performers with a 3.5% climb.

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