* Oil volatile, responds to swings in dollar
* South Korea, U.S. start military drill; China calls for
talks
* Coming Up: Eurozone Economic sentiment Nov; 1000 GMT
(Recasts with price rebound, adds risk manager, analyst
coments)
By Alejandro Barbajosa
SINGAPORE, Nov 29 (Reuters) - Oil rose past $84 on Monday
after the European Union approved a rescue for Ireland and
outlined a permanent system to resolve the euro zone's debt
crisis, providing some confidence that energy demand growth
will remain resilient next year.
U.S. crude for January <CLc1> rose as much 0.8 percent to
$84.46 a barrel, nearing Friday's peak of $84.53, the highest
intraday price since Nov. 16, and was up 52 cents at $84.28 by
0209 GMT. Prices reached a two-year high of $88.63 on Nov. 11.
ICE Brent for January <LCOc1> rose 57 cents to $86.15,
returning to positive territory as the dollar pared gains.
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. []
"The southern European sovereign debt crisis would have to
take a severe turn for the worse to derail positive commodity
price trends that are finding strong support from improving
fundamentals and positive market sentiment towards growth
assets" following the second wave of U.S. expansionary
monetary policy, Barclays Capital analysts, including Kevin
Norrish, said in a report on Monday.
Still, some market participants were wary that the package
for Ireland would fail to end Europe's credit problems, citing
the Greek crisis as a precedent of how markets intially
reacted positively to a bailout and then slumped.
"It is 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.
Currency and bond traders doubted the deal was enough to
prevent fiscally pressured Portugal and Spain from being next
in line to suffer a debt crisis.
"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," Kwek
said.
GEOPOLITICAL RISK RETURNING
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.
Tensions between North and South Korea have mostly been
bearish for the oil market because of the implications that
war would have on demand at the heart of Asia's top consuming
region. But geopolitical events in the Middle East were having
a a mild bullish effect on the market, traders said.
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.
[]
"Geopolitical risk has been on the back burner ever since
the Lehman shock trashed demand, but so many little things are
making a comeback," said Tony Nunan, a risk manager with
Tokyo-based Mitsubishi Corp.
"It is still at the margin, but trying to come into the
limelight."
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 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-barrel-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 Clarence
Fernandez)
