* Dollar, treasuries up on Korean incident, pressured oil
* Irish debt, contagion fear pressure euro, weigh on oil
* U.S. oil inventory draw down expected, supportive to oil
* Coming up: API oil inventory data, 4:30 p.m. EST Tuesday
(Recasts, updates prices and market activity, new byline
and changes dateline from previous LONDON)
By Robert Gibbons
NEW YORK, Nov 23 (Reuters) - Oil recovered from an early
slide on Tuesday in choppy trading as fears of an escalating
euro zone crisis and a North Korean attack on a South Korean
island triggered a rally in the dollar, but oil bounced when a
drop to a session low near $80 attracted buying interest.
The dollar index <.DXY> posted its strongest rise in over a
month as questions over Ireland's willingness to adopt an
austerity budget threatened to deepen the political crisis and
after North Korea fired artillery shells at a South Korean
island in one of the heaviest attacks since the 1953 cease
fire. []
"Markets are under pressure on North and South Korea
fighting, as there seems to be a flight to dollars. Concerns
about Ireland debt didn't go away. So far crude has held the
$80 area," said Tom Bentz, broker at BNP Paribas Commodity
Futures Inc.
But oil later recouped most of its losses as many traders
held off going short ahead of the U.S. Thanksgiving holiday on
Thursday and amid expectations weekly oil inventory reports
will show stockpiles fell last week.
U.S. crude oil for January delivery <CLc1> fell 2 cents to
$81.72 a barrel at 1:34 p.m. EST (1834 GMT).
Oil bounced after earlier sliding to an intraday low of
$80.28, with total crude oil volume picking up a bit from
Monday's tepid showing.
In London, ICE January Brent crude <LCOc1> fell 20 cents to
$83.76 a barrel.
After weeks of whipsaw trade fueled by expectations over
the Federal Reserve's quantitative easing policy followed by
fears of Chinese monetary tightening and European stability,
oil prices have traded in a narrow band the past five days,
with volumes slumping as the year-end looms.
The European Union urged Ireland on Tuesday to adopt an
austerity budget on time in order to receive an EU/IMF bailout
despite calls for an immediate general election that could
disrupt the rescue. []
The EU affairs and the Korean incident overshadowed reports
showing the U.S. economy grew faster than previously estimated,
though existing home sales fell more than expected in October.
[]
Investors also anticipated the release of minutes from the
Federal Reserve's November meeting around 2:00 p.m. EST (1900
GMT) followed by weekly oil inventory data from the American
Petroleum Institute at 4:30 p.m. EST (2130 GMT).
"We keep holding above $80 and expectations inventories
fell and some short covering ahead of the holiday are
supportive," said Gene McGillian, analyst at Tradition Energy
in Stamford, Connecticut.
U.S. crude stockpiles were expected to have fallen a third
straight week following a surprisingly heavy decline a week
ago, according to a Reuters analyst survey on Monday. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Map showing the location of the artillery exchange on the
Korean peninsula: http://link.reuters.com/wyh76q
Graphic of the components of Reuters-Jefferies CRB Index of
commodities: http://link.reuters.com/kew48n
Links to stories on Europe's debt crisis: []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
World equities also fell while 10-year Treasury futures
<TYc1> rose as the tensions between the two Koreas added to
global economic worry. [] []
The euro plunged to a seven-week low against the dollar and
fell 2 percent versus the yen on growing worries the euro
zone's debt crisis could spread beyond Ireland. []
The gasoline crack spread also narrowed for a second day,
falling to $5.96 intraday and U.S. gasoline futures <RBc1> also
remained under pressure.
"All the refinery restarts in New York Harbor area still
putting pressure on products, mostly RBOB (gasoline)," said
Bentz.
(Additional reporting by Gene Ramos in New York, Christopher
Johnson in London and Florence Tan in Singapore; Editing by
Marguerita Choy)
