Oil rose above $78 a barrel today, adding to its gains from yesterday, as the news of Dubai's debt problems and their impact on the global economic recovery were downplayed. Dubai fears seem to be fading away, said Carsten Fritsch, analyst at Commerzbank. The impetus for the decline in concern about Dubai's debt was an announcement on Monday from Dubai World, that it has planned restructuring of some of its units involved in $26 billion of debt.
The consequent weakening of the dollar, rising stock markets and rising risk appetite are all giving oil another boost. U.S. January crude futures rose 97 cents to $78.25 a barrel by 11:10 GMT. Brent crude added 81 cents to $79.28.
Further price support came from manufacturing data from China. The economy of the world's second-largest oil consumer is ending the year on a strong note, business surveys showed.
Oil had risen on Monday partly after the detaining of five Britons in Iran. Great Britain is one of the Western powers involved in a long-running struggle with Tehran over the its desire to build nuclear warheads.
Oil has rallied from below $33 last December but has held in a narrow band of $70 to $82 (please see below chart) over the past two months. We see very little that would push prices above this range in the next week, given no supply disruption. The ample inventory in the diesel and heating oil markets should prevent prices from breaking much higher for the time being.
COMING UP TODAY:
Late, the American Petroleum Institute's weekly report will give the latest indication of fuel demand in the USA, the world's largest consumer. Crude stockpiles probably were little changed.