Oil Is Steady After $3 Drop on Dollar

Crude oil was little changed in New York after falling more than $3 a barrel yesterday amid short- lived gains in the dollar and signs economic growth is slowing across Europe, which may curtail energy demand.

Oil dropped for the first session in four yesterday as the euro fell to its lowest in a week before rebounding. German production, adjusted for seasonal swings, fell 2.4 percent from April, the biggest decline since February 1999, and the index of U.K. manufacturing production unexpectedly decreased to the lowest since September.

Crude oil for August delivery rose 4 cents to $141.41 a barrel at 8:16 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, oil fell as much as 4 percent as the dollar rose amid speculation that leaders from the Group of Eight industrialized nations may signal support for the currency and address high energy prices.

Oil settled down $3.92, or 2.7 percent, yesterday at $141.37 a barrel. It reached a record $145.85 on July 3. Prices have more than doubled in the past year.

The euro fell to $1.5611 against the dollar yesterday, the lowest since June 25. It was trading at $1.5723 as of 8:05 a.m. in Sydney. President George W. Bush said July 6 that ``the U.S. believes in a strong-dollar policy.''

Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. may also consider the effect of high energy prices on the global economy at their three-day summit in Japan.

Italian Prime Minister Silvio Berlusconi said yesterday that deposits required to trade oil futures should be raised to discourage speculation, amid fears by ``some'' G-8 leaders that oil prices will reach $200 a barrel.

Also pressuring prices were comments by Iranian Foreign Minister Manouchehr Mottaki on CNN July 6 that talks about its nuclear program are ``in a new environment'' and ``new approaches'' with the U.S. are possible. Speculation of an attack on Iran that could disrupt exports from OPEC's second-largest producer helped push oil to a record last week.

Iran's nuclear program is an ``unalienable right,'' President Mahmoud Ahmadinejad said yesterday, encouraging all countries to use atomic power to meet their energy needs. He spoke with Radio Televisyen Malaysia, the state-run broadcaster and Bernama, the official news agency, in Kuala Lumpur. He is attending a summit of the Eight Islamic Developing Countries.

The fewest Americans in three years may have traveled over the July Fourth weekend as record gasoline prices and a slowing economy forced consumers to curtail spending, according to AAA, the largest U.S. motoring group. The number of people taking trips of at least 50 miles (80 kilometers) from home over the holiday weekend will fall 1.3 percent to 40.5 million, AAA said.

Regular gasoline at the pump, averaged nationwide, rose 0.1 cent to a record $4.108 a gallon, AAA said yesterday on its Web site.

Brent crude oil for August settlement fell $2.55, or 1.8 percent, yesterday to $141.87 a barrel on London's ICE Futures Europe exchange. Futures climbed to a record $146.69 on July 3.

TradingEconomics.com, Bloomberg
7/7/2008 5:37:37 PM