* South Korea, U.S. start military drill; China calls for
talks
* Coming Up: Eurozone Economic sentiment Nov; 1000 GMT
By Alejandro Barbajosa
SINGAPORE, Nov 29 (Reuters) - Oil pared early gains on
Monday as the dollar strengthened on skepticism that a
European Union rescue for Ireland would halt contagion to
other euro zone economies.
The EU over the weekend approved Ireland's bailout and
outlined a permanent system to resolve the block's debt
crisis. That instilled some confidence that energy demand
growth would remain resilient next year as markets opened.
U.S. crude for January <CLc1> rose as much as 44 cents to
$84.20 a barrel, approaching Friday's 10-day intraday high
just above $84.50, and was up 35 cents at $84.11 at 0209 GMT.
Prices reached a two-year high of $88.63 on Nov. 11.
Finance ministers from the 16-nation euro zone, anxious to
prevent market contagion engulfing Portugal and Spain,
unanimously endorsed an emergency loan package of 85 billion
euros ($115 billion) to help Dublin cover bad bank debts and
bridge a huge budget deficit. []
"It was just a relief rally, but there are still so many
structural problems that people are already targeting other
dominoes like Portugal and Spain," said Michelle Kwek, an
analyst at Informa Global Markets in Singapore.
"Markets are not believing measures will be enough to
contain the crisis, and that also combines with the tensions
in Korea. You wouldn't want to be punting on anything."
South Korean President Lee Myung-bak on Monday labelled
North Korea's artillery attack on a southern island a crime
against humanity and said Pyongyang will pay the price for any
further provocation. []
China on Sunday called for emergency talks to resolve the
crisis, and Seoul and Tokyo said they would study the
proposal, as the U.S. and South Korean militaries started a
massive drill.
In other geopolitical news, Saudi Arabia's King Abdullah
has repeatedly urged the United States to attack Iran's
nuclear program and China directed cyberattacks on the U.S.,
according to a vast cache of U.S. diplomatic cables released
on Sunday in an embarrassing leak that undermines U.S.
diplomacy. []
King Abdullah, who is being treated in New York for a
blood clot which complicated a slipped disc, has started
rehabilitation and his health is "very reassuring", the
kingdom's health minister said on Sunday. []
The dollar strengthened by about 0.15 percent on Monday
against a basket of currencies, capping oil's gains as risk
aversion grew, Kwek said. ICE Brent for January <LCOc1> rose
29 cents to $85.87.
The embattled euro crept off two-month lows earlier on
Monday after European authorities tried to protect the
region's financial stability with Ireland's rescue package.
Enbridge Inc's 670,000 barrels a day Line 6A oil
pipeline in the U.S. Midwest was expected to run at reduced
rates until this week, creating another costly bottleneck for
Canadian crude exports, the company said on Friday.
[]
(Reporting by Alejandro Barbajosa; Editing by Manash Goswami)
