Crude Oil Rises

Crude oil rose as the weaker dollar enhanced the appeal of commodities as a currency hedge and the New York Times reported that Israel held a rehearsal for a potential bombing attack on nuclear targets in Iran.

Oil futures have nearly doubled over the past year as investors sought refuge from a declining dollar. Traders have pared bets for a Federal Reserve rate increase on June 25. Iran, OPEC's second-biggest oil producer, would respond to an Israeli attack with a ``heavy blow,'' a senior cleric said.

``The only way to increase the value of the dollar is by increasing interest rates, which doesn't look likely at the meeting on the 25th,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The simulated attack of Iran by Israeli warplanes is certainly not going to reduce geopolitical tensions.''

Crude oil for July delivery rose $3.51, or 2.7 percent, to $135.44 a barrel at 9:08 a.m. on the New York Mercantile Exchange. Futures climbed to a record $139.89 on June 16.

The July contract expires today. The more-active August contract increased $3.49, or 2.6 percent, to $136.09 a barrel.

Brent crude oil for August settlement rose $3.38, or 2.6 percent, to $135.38 a barrel on London's ICE Futures Europe exchange. Prices climbed to a record $139.32 on June 16.

An Israeli military exercise involving more than 100 F-16 and F-15 fighters seems to have been a rehearsal for a bombing attack on Iran's nuclear facilities and long-range conventional missiles, the New York Times reported, citing several unidentified U.S. officials., Bloomberg
6/20/2008 6:37:04 AM