Oil prices rise modestly on dollar's decline against the euro

Source: Agencies  |   2008-6-25  |     ONLINE EDITION

OIL futures ended an uneven session with a modest gain yesterday as traders awaited news that could help the market break out of a trading range that has lasted for more than two weeks.

Light, sweet crude for August delivery rose 26 cents to settle at US$137.00 a barrel on the New York Mercantile Exchange after alternating between gains and losses for most of the day. In London, August Brent crude futures rose 55 cents to settle at US$136.46 a barrel on the ICE Futures exchange.

Some investors were buying in response to another drop in the dollar. When the dollar loses ground, crude and other commodities tend to rise on their appeal as a hedge against inflation. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies. Many analysts believe the dollar's protracted decline has been one of the main reasons oil has nearly doubled in value over the past year.

But yesterday's advance was limited by concerns about the impact high prices are having on demand, and worries about Congress' increasing scrutiny of the oil market.

In a weekly report, MasterCard's SpendingPulse survey found that demand for gasoline in the US fell 2.7 percent last week compared to the same week last year, and is off by an average of 3.6 over the last four weeks compared to the same period in 2007.
Prices drew some support from recent production outages in Nigeria. But reports of an oil workers strike, which helped push prices higher Monday, were denied by Babatunde Ogun, president of Pengassan, Nigeria's white-collar oil union.

"There's no strike," Ogun said. "We're trying to settle the matter."

Ogun said talks continued yesterday among his union, Chevron Corp and government mediators in Nigeria, Africa's largest oil producer and a major US supplier.