Oil Falls, Stronger Dollar Weighs


Oil gave up early gains on Monday, as the dollar and comments from Algeria's oil minister curtailed a rally spurred by a winter storm in top oil consumer the United States.

U.S. light, sweet crude for January delivery, which expires on Tuesday, was down 71 cents to $90.56 a barrel by 7:59 a.m. EST.

London Brent crude for February delivery was down 46 cents at $91.23 a barrel.

Prices slipped further after Algeria's oil minister Chakib Khelil said OPEC might increase oil output at a February meeting if the market needed more oil.

Khelil, who will be OPEC's president in 2008, also said the group might not change output if the winter is not harsh and the U.S. economy weakens further.

The Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil, meets next on February 1 to review supply policy.

Crude oil prices had retreated earlier as the dollar reached fresh two-month highs against a basket of currencies.. The stronger dollar also hit gold, which touched its lowest level in about two weeks.

Oil and other commodities have developed an inverse relationship with the dollar, strengthening if it weakens and vice versa.

The U.S. currency is up after data on Friday showed U.S. consumer prices rose by their highest in more than two years in November, dampening prospects for further U.S. interest-rate cuts and highlighting risks to the economy.

The uncertain U.S. and global macro-economic outlook has become a major ingredient in the oil price.

Last week, for example, oil moved more violently in response to macro-economic events than to bullish demand growth forecasts from the International Energy Agency.

Oil is down about $10 a barrel from record highs of $99.29 a barrel, reached on November 21.


Reuters
12/17/2007 6:51:23 AM