World oil prices gain ground

LONDON (AFP) – World oil prices advanced on Tuesday as fears over Dubai's debt problems receded, and after overnight gains on upbeat US business data that boosted economic recovery hopes, analysts said.

New York's main contract, light sweet crude for January delivery, added 86 cents to 78.14 dollars a barrel.

Brent North Sea crude for January delivery gained 75 cents to 79.22 dollars a barrel in early London trading.

"Oil rallied ... as tensions eased over the state of the fallout from the Dubai debt problems," said ODL Securities analyst Marius Paun.

Before the weekend, New York crude had tumbled almost two dollars on Friday as markets reacted to Dubai's announcement that it wanted a six-month debt payment moratorium for its flagship conglomerate Dubai World.

However on Tuesday, investors welcomed a 26-billion-dollar (17-billion-euro) debt restructuring for Dubai World.

Crude futures had leapt on Monday after an unexpected rise in business activity in the US Midwest region and and an increase in the Chicago purchasing managers index.

The market had also won support from news that key crude producer Iran had seized five British sailors in the Gulf.

A top aide to Iran's President Mahmoud Ahmadinejad said on Tuesday that the five British sailors detained in Gulf waters would be dealt with firmly if found guilty of "ill intentions."

"Any headline including Iran has become a bit more sensitive and with the early uncertainty about the boat involved, it did not take long for oil prices to soar," said Petromatrix analyst Olivier Jakob.

Meanwhile, Iran said on Tuesday world powers have been overhasty in reacting to Tehran's decision to build 10 new uranium enrichment plants.

World powers are angry after Iran announced on Sunday it plans to build 10 new uranium enrichment plants after it was rebuked by the UN atomic watchdog for constructing its second such plant near the Shiite holy city of Qom.

Twenty-five of the 35 members of the International Atomic Energy Agency (IAEA) voted against Tehran and asked it to freeze the building of the plant.

In a separate development on Tuesday, Iran, OPEC's second largest oil producer, said that it does not expect any decision to hike crude output at the cartel's meeting later this month.

"Given the circumstances, there will not be an output increase and OPEC will not permit members to do it," Oil Minister Masoud Mirkazemi told reporters at a press conference.

"These days the (market) situation is not right to raise output. This is my forecast," he said.

The minister also urged members of the Organization of Petroleum Exporting Countries, which is to meet on December 22 in Luanda, to work to stabilise oil prices. "We should exert effort to reach price stability in the market."

OPEC president Jose Maria Botelho de Vasconcelos of Angola had said in November that a price of between 75 and 80 dollars a barrel would be satisfactory.

Some OPEC members, including Venezuela, are expected to announce they want to maintain current production levels, which have been set since January at 24.84 million barrels per day.