Despite Dubai Financial Woes, Crude Bounces Back Above $77
Exiting a holiday weekend punctuated by low-volume trading and broader financial concerns that weighed on commodity prices, crude futures continued to test the $75 point mark Monday, but ultimately made positive gains at the close of a choppy session on the New York Mercantile Exchange.
With purchasing for the energy commodity accelerated by a weakened dollar and strong refined products, the December contract of which is set to expire on the NYMEX today, the price of light, sweet crude oil for January delivery settled more than a $1 higher than Friday's close at $77.28 a barrel.
"I think that after the way we collapsed on Friday with thin trading, we tested that support area at $75 and the market rebounded pretty nicely," commented Gene McGillian, analyst and broker at Tradition Energy in Stamford, Connecticut.
"I'm not sure whether we basically flushed out some of those new shorts as the market traded through that [$75] area on Friday," McGillian continued, "or that we have something afoot here that's going to re-ignite our rally towards this year's highs, but the market looks pretty good today."
Additionally, natural gas futures slipped below their $5-threshold Monday, but still burned brightly on the NYMEX at $4.848 per thousand cubic feet.
Crude Climbs Out of Dubai Slump
This past Friday, news concerning delayed repayment of Dubai's billion-dollar debt sent shockwaves through broader financial markets, to which crude prices have been bound in recent months.
Dubai's shaky financial situation called into question the stability of the economic recovery as a whole, which sent U.S. stocks and crude settlement prices spiraling downward at the close of the Thanksgiving week.
"The price volatility [driven by news out of Dubai] definitely affected the market on Friday, but what we really saw today was the reemergence into our last six-week trading range," noted McGillian. "We're basically right in the middle of the $75-$82 range," he added, pinpointing the current lowest and highest trading points that have established a well-defined movement in crude spot prices.
The analyst also underscored crude's firm attachment to the greenback's movement, which will likely remain unchanged in the near term.
Today, the dollar slipped against the euro as safe-haven demand for the U.S. currency eased on stronger-than-expected U.S. regional business activity data. However, the dollar pared some of its losses after a Dubai official noted that the government does not guarantee Dubai World debt, Reuters reported.
"We have a lot of important news coming out," McGillian observed for the week. "Whether or not the market's gasping or making an attempt to try and move higher here -- and we'll find out as we go through the week whether it can do it -- remains to be seen, but we'll probably test $75 again," the analyst contended.