Oil prices sank to near $74 a barrel on Friday in Asia as investors curtailed their risky bets on commodities amid uncertainty about the global fallout from Dubai’s financial troubles.
Benchmark crude for January delivery was down $3.50 to $74.46 at early afternoon Bangkok time in electronic trading on the New York Mercantile Exchange, extending losses from European trade. Trading in the U.S. was closed Thursday for the Thanksgiving holiday.
Just a year after the global downturn derailed Dubai’s explosive growth, the emirate is now so swamped in debt that it’s asking for a six-month reprieve on paying its bills. Its main development engine, Dubai World, has said it would ask creditors for a “standstill” on paying back its $60 billion debt until at least May, news that roiled markets worldwide.
“The main factor in the fall seems to be the events in Dubai,” said Nick Raffan, head of mining and resources research at consultancy Fat Prophets in Sydney. “People are suddenly reevaluating their risk appetite.”
After zooming to $147 a barrel in July 2008 and crashing to $32 in December, oil prices have meandered in the high $70s for more than a month as investors weigh a slow U.S. recovery against surging Asian demand.
Mr. Raffan said oil’s losses Friday were driven by increased wariness about investment in riskier assets such as stocks and commodities rather than new information about actual demand for oil.
However, recent figures on durable goods orders in the U.S. suggest growth in demand for oil is likely to remain subdued for awhile, he said.
In other Nymex trading, gasoline for December delivery was down 7.95 cents at $1.9181 a gallon and natural gas was off 10.3 cents at $5.06 per 1,000 cubic feet.
In London, Brent crude for January delivery fell $1.19 to $75.80 on the ICE Futures exchange.