London (Platts)--27Nov2009/743 am EST/1243 GMT

Crude futures plunged in heavy volumes Friday, as fears over Dubai's debt restructuring spurred a selloff across global stock markets and a rush into the US dollar, sources said.

"People are afraid of how much the banks are exposed to Dubai. This gives a lot of ammunition for speculators to close out their [long] positions," an analyst at Scandinavian bank said.

"It's still all about this Dubai debacle," said another source. "What is tough to tell right now is whether this is still a full-on recession or just a bear trap."

Front-month WTI futures traded to $72.39/barrel in the Asian session--the lowest since October 9--before recovering to $74.67/b at 12:08 GMT, down $3.69/b from Wednesday's settle, when the US began Thanksgiving holidays.

January Brent ICE futures fell $1.36/b to $75.63/b, after touching a low of $73.70/b, its lowest since October 13.

The ICE dollar Index jumped to 75.327, up 0.501 of a basis point from the overnight settle.

"What we've seen every time [is as] risk appetite diminishes, the dollar gets stronger with people going back to safe haven assets," the analyst said.

Money managers have accumulated almost 150 million barrels of length in WTI futures, up from around 60 million in October, sources said.

"This is important data and I would expect to see a flush out of the length," another source said.

In addition, the approach of the seasonally weak December period is likely to keep the market under pressure in the short term, sources said.

"December will be a weak period for oil prices," a source said. "There will be some pressure for heads of companies to run down their inventories before year end and so it will be hard to find takers of physical oil."

In products markets, December ICE gasoil futures fell below $600/mt for the first time in nearly seven-weeks to an intra-day low of $580/mt, while December/January spreads weakened to minus $12/mt.

"We are at the end of November and demand is weak because we've had above average temperatures across most parts of Europe," a trader said. "[In addition] there is plenty of of oil in storage, both in onshore tanks and on ships, and the bearish fundamentals are priced in by the discounts in the physical market and the ICE gasoil spreads."

--Brian Murphy, brian_a_murphy@platts.com