U.S. oil prices slipped in light post-holiday trading on Friday as Europe’s debt crisis pushed the euro to a two-month low against the dollar and investors eyed tensions between North Korea and South Korea.
The dollar index .DXY pared gains, helping oil bounce off lows along with geopolitical concerns including the Korea situation and top oil exporter Saudi Arabia’s announcement of 149 arrests linked to al Qaeda over the past eight months.
“There is some feeling the dollar index may have maxed out for the day and the geopolitical tensions, Korea and the Saudi arrests could be limiting losses, but are being trumped so far by the euro zone problems,” said Robert Yawger, senior vice president, energy futures, at MF Global in New York.
U.S. gasoline futures, which managed a short-lived gain intraday as next Tuesday’s December refined products contract expirations approached, also helped pull crude futures off lows.
U.S. crude oil for January delivery fell 47 cents to $83.39 a barrel by 11:45 a.m. EST (1645 GMT), well above an earlier $82.78 low. Front-month crude remained on track to post a gain for the week, after two consecutive weekly losses.
The front-month crude price has not dropped below $80 since October 20 and has seesawed after reaching a 25-month peak at $88.63 on November 11.
U.S. crude trading volume totaled about 183,500 lots, with roughly two hours left of a shortened session. That was well below the 465,481 lots traded on the 2009 post-Thanksgiving Friday and about 70 percent below the 30-day average.
In London, ICE January Brent crude fell 81 cents to $85.29 a barrel.
The dollar index .DXY hit a two-month high and the euro fell to a two-month low against the greenback as euro zone debt worries intensified.
European officials denied reports on Friday that Portugal faced pressure to seek a bailout and Spain ruled out needing help to manage its finances.
A stronger dollar typically pressures oil prices as it makes dollar-denominated crude more expensive for holders of other currencies.
The Korean peninsula remained tense as China warned against military acts near its coast ahead of U.S.-South Korean naval exercises that North Korea, days after shelling a South Korean island, said risked pushing the region to war.
Chinese Foreign Minister Yang Jiechi said his country was determined to prevent a repetition of this week’s violence on the Korean peninsula after meeting North Korea’s ambassador to Beijing.
Yang also spoke by phone to his U.S. and South Korean counterparts.
While China wrestled with geopolitical tension, oil investors worried whether the world’s No. 2 oil-consuming country would take more action to cool inflation and its economy after its recent moves to raise banks’ reserves.
