* Investors shrug off Ireland debt downgrade
* German business sentiment highest level since 1991
* Euro up sharply against the dollar index
* Technicals show U.S. oil set to drop next week
(Recasts, adds comment, updates prices, pvs dateline SINGAPORE)
By Una Galani
LONDON, Dec 17 (Reuters) - Oil hovered around $88 on Friday,
supported by a weaker dollar and unseasonably cold northern
hemisphere weather as investors shrugged off fresh concerns
about high levels of debt in the eurozone.
Investors held their nerve after Moody's slashed Ireland's
debt rating and put the country, along with Greece, on negative
outlook warning that further downgrades could follow.
[]
"The currency factor is quite important right now for the
oil market. People are looking to the foreign exchange markets
and the euro is pushing down the dollar," said Tetsu Emori, a
fund manager at Tokyo-based Astmax Co Ltd.
By 1028 GMT, the euro had risen 0.8 percent against the
dollar which had, in turn, fallen 0.6 percent against a basket
of currencies <.DXY>.
U.S. crude for January <CLc1>, which expires on Monday,
climbed 20 cents to $87.90 a barrel by 1019 GMT, rebounding from
Thursday's tumble of more than 1 percent. ICE Brent for February
delivery was up 40 cents at $92.00.
Prices have also been supported by the cold weather in much
of Europe while the U.S. Northeast, the top heating oil market,
was on track to have its ninth coldest December since 1950.
Concerns over the eurozone were also tempered by German
business sentiment which rose to its strongest level since 1991,
according to a closely-watched survey by the Munich-based Ifo
think tank. []
Oil and dollar-denominated commodities often move inversely
to the dollar; a weaker dollar typically lifts oil prices as it
lowers the value of greenbacks paid to producers.
"If anything, the recent long-side bias could likely be
scaled back somewhat, as hedge funds seek to close out both the
quarter and the year. This could result in prices working
slightly lower as we head into the year-end," said Edward Meir,
a senior commodity analyst at MF Global.
Technicals showed that crude was set to fall to $85.41 next
week, which would be the lowest since Dec. 1. []
Analysts remain cautious that prices could weaken and become
more volatile as operations wind down for the year end and
trading volumes begin to thin.
Investors will remain on alert over the weekend for any move
from China to raise interest rates which could cool demand,
added Meir.
(Additional reporting by Randy Fabi in Singapore; editing by
Keiron Henderson)
