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Oil Rises for a Third Day on Dollar Declines, Output Disruption

Bloomberg

 

 

Oil Rises for a Third Day on Dollar Declines, Output Disruption 

By Christian Schmollinger and Gavin Evans

June 30 (Bloomberg) — Crude oil rose for a third day, trading near a record $142.99 a barrel in New York, as the slumping dollar and concern that supply may be disrupted spurred demand for commodities.

Oil has climbed 48 percent so far this year, compared with the 57 percent gain in all of 2007. Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel, today said investors should avoid the dollar and commodities are the “best investment” for the year.

“The dollar will be getting weaker so that is bringing fresh money into the oil market,” said Tetsu Emori, a fund manager with Astmax Ltd., a fund management company, in Tokyo. “Oil market sentiment is getting stronger.”

Crude oil for August delivery rose as much as $1.75, or 1.3 percent, to $141.96 in after-hours electronic trading on the New York Mercantile Exchange. It was at $141.82 a barrel at 1:15 p.m. in Singapore.

The contract reached its all-time high on June 27 before settling at $140.06, a gain of 0.3 percent on the day. Prices rose 4.2 percent last week as the Federal Reserve left interest rates unchanged and showed no signs it will support the dollar any time soon.

Oil has also gained this year as militant attacks in Nigeria, Africa’s second-biggest crude producer, and output failures in the North Sea reduced supplies.

Iran’s Nuclear

Declines in the dollar and pressure on Iran to end its uranium enrichment program may push oil to $170 a barrel by the end of the year, OPEC President Chakib Khelil said June 28.

Foreign ministers from the Group of Eight nations last week suggested more talks to coax Iran into opening its nuclear program to inspectors, after speculation the Islamic Republic faces an imminent Israeli strike. Iran is the second-largest oil producer within OPEC.

The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and Iran is the group’s second-largest producer.

The Institute for Supply Management’s factory index probably showed U.S. manufacturing fell to 48.6 in June from 49.6 the previous month, according to a Bloomberg survey of economists. A reading below 50 signals contraction. The ISM will release the data tomorrow.

“That will have a pretty good impact across all the commodity markets,” saidGerard Burg, the energy and minerals economist at National Australia Bank Ltd. in Melbourne.

Interest Rates

The dollar may extend its decline against the euro if the European Central Bank boosts rates on July 3. The European Central Bank is expected to raise interest rates a quarter- percentage point to 4.25 percent, according to a survey of economists by Bloomberg News.

“The ECB meeting as well will provide a bit of guidance as to what the potential for demand is going forward,” said National Australia’s Burg.

The dollar was at $1.5788 against the euro from $1.5794, the lowest since June 9.

Avoid the dollar “at all costs,” Rogers said in Shanghai today. “The best investments in 2008 are commodities and natural resources. Agricultural prices have much higher to go over the next decade. We have a shortage of everything including seeds.”

Speculators Bet

While the biggest driver in oil prices remains tight global supplies, movements in currencies and declining world equity markets have increased investment in commodities and volatility of prices, Burg said.

Hedge fund managers and other large speculators almost doubled their bets on rising prices in the week ended June 24, according to U.S. Commodity Futures Trading commission data.

Net-long positions in New York oil contracts, the difference between contracts to buy and sell the commodity, gained 90.5 percent to 24,217 contracts. Long positions rose from a five-month low a week earlier while contracts to sell oil fell a second week to a two-month low.

Brent crude oil for August settlement rose as much as $1.58, or 1.1 percent, to $141.89 a barrel on London’s ICE Futures Europe exchange. It was at $141.75 a barrel at 1:09 p.m. Singapore time. Prices reached $142.97, the highest since trading began in 1988, on June 27.

A dispute over safety and staff selection at Chevron Corp.’s unit in Nigeria, Africa’s biggest oil producer has been settled, ending a five-day strike, a union official said June 28.

To contact the reporters on this story: Christian Schmollinger in Singapore at [email protected]Gavin Evans in Wellington at[email protected]

Last Updated: June 30, 2008 01:19 EDT

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