Oil Rises as U.S. Dollar Drops

Crude oil rose for a third day as the U.S. dollar dropped, enhancing the appeal of commodities as an inflation hedge, and a labor strike threatened to deepen production losses in Nigeria.

A white-collar workers' union continued a strike against Chevron Corp.'s local unit for a second day in Nigeria, where attacks last week cut output by 300,000 barrels a day. OPEC members besides Saudi Arabia have no intention of raising output to bring down near-record prices, Secretary General Abdalla El- Badri said in Brussels today.

Crude oil for August delivery rose as much as $2.01, or 1.5 percent, to $138.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $137.94 at 1:35 p.m. London time.

Prices touched a record $139.89 on June 16 and are up 98 percent in the past year. Yesterday, oil rose $1.38, or 1 percent, to settle at $136.74 a barrel.

Dow Chemical Co. said it will raise prices on its products by as much as an additional 25 percent in July because of ``relentless'' gains in the cost of energy.

OPEC President Chakib Khelil, also speaking in Brussels, said Saudi Arabia's pledge at the weekend to raise supplies by 200,000 barrels a day next month won't temper prices. Speculation rather than a lack of crude is driving the market, Secretary General El-Badri said.

Iran denied a rumor of a strike on its nuclear facilities that sent oil prices higher today, Reuters reported. The U.S. and Israeli militaries said they had no knowledge of any attack against Iran's nuclear sites.

The European Union stiffened sanctions against Iran's nuclear program yesterday, shutting down the EU offices of Bank Melli Iran.

Nigeria's senior white-collar oil workers' union continued a strike against Chevron Corp.'s local unit for a second day without stopping crude production, a union official said. Last year the company 2007 produced about 350,000 barrels of oil a day from its 32 fields in Nigeria, according to the company's Web site.

Chevron already halted 120,000 barrels a day of onshore production after a pipeline was blown up last week. Royal Dutch Shell Plc may halt exports from its 190,000 barrel-a-day Bonga field following a June 19 attack on its platform there, the company said last week.

StatoilHydro ASA's North Sea Oseberg oil and gas field resumed production after a fire on platform A halted production June 15. A fire in a high-voltage room had halted production of about 150,000 barrels of oil a day from these fields.

The dollar's fall against the euro made commodities cheaper for buyers outside the U.S. The U.S. dollar was at $1.5573 per euro as of 8:42 a.m. London time, compared with $1.5493 earlier.

Brent crude oil for August settlement was at $137.53 a barrel, up $1.65, on London's ICE Futures Europe exchange at 1:25 p.m. London time. It rose $1.05, or 0.8 percent, to settle at $135.91 a barrel yesterday. Prices climbed to a record $139.32 on June 16.



TradingEconomics.com, Bloomberg
6/24/2008 6:58:59 AM