Crude oil falls below $75

The price of oil has become the latest casualty of the unfolding Dubai debt crisis in a development that could spread the troubled emirate's pain to its neighbour Abu Dhabi. Crude has fallen below US$75 per barrel today in New York, retreating to its lowest level in six weeks. Analysts said market sentiment had been dented by the Dubai Government's unexpected request on Wednesday for the creditors of its Dubai World conglomerate to agree to at least a six-month delay in payments on nearly $60 billion (Dh220bn) of debt. The technical default is part of a government plan to restructure Dubai World.

"The Dubai situation is very worrying and people are obviously worried about a potential domino effect if Dubai can't pay off their debt," Benson Wang, a senior adviser at Commodity Broking Services in Sydney, told Reuters. "This episode has destroyed the confidence between borrowers and lenders and it has also shaken the confidence about the pace of a global economic recovery." The liabilities of Dubai World could account for as much as half of Dubai's total government and corporate debt, according to an estimate by the bond rating agency Standard & Poor's. Until Wednesday, the Government had signalled that those debts would be paid on time. Banks based in Abu Dhabi, which controls most of the UAE's oil wealth, have recently purchased billions of dollars of Dubai bonds, indicating that Abu Dhabi planned to stand by its troubled neighbour.

But Abu Dhabi's oil-dependent economy is the most vulnerable in the UAE to a drop in crude prices. tcarlisle@thenational.ae