Weak Dollar Pushes Oil Prices Higher

Investors Shrug Off Saudi Promises To Boost Production And Bid Oil Up To Near $140 A Barrel

(CBS/ AP)  Crude oil futures hit a record near $140 a barrel Monday as investors shrugged off Saudi Arabia's promise to boost production and instead focused on a weaker dollar.

Light, sweet crude for July delivery soared to a trading record of $139.89 before retreating to trade up $2.39 at $137.25 a barrel on the New York Mercantile Exchange.

Many investors buy commodities such as oil as a hedge against inflation when the dollar falls. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies. Many analysts believe the dollar's protracted decline is a major factor behind oil's doubling in price over the past year.

In afternoon European trading, the euro bought $1.5470, up from $1.5354 late Friday in New York.

Also supporting prices was an overnight fire at a StatoilHydro ASA drilling rig in the North Sea, which could affect as much as 150,000 barrels of daily oil production, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, in a research note.

Saudi Arabia, the world's largest oil producer, told U.N. chief Ban Ki-moon over the weekend that it would boost output by 200,000 barrels a day, or by 2 percent, from June to July. In May, the kingdom raised production by 300,000 barrels a day.

Speaking to CBS News Foreign Affairs Analyst Pamela Falk, Secretary-General Ban Ki-moon said on Sunday that the Saudi oil minister confirmed to him that the government will increase its oil production to 9.7 million barrels a day, with a cumulative increase of 500,000 barrels over the course of June and July, a slight clarification of earlier news reports.

The new production figures, Falk said, would actually represent an increase of 300,000 barrels a day in June, and 200,000 in July.

The latest promise of a production increase by the kingdom was largely ignored by traders Monday amid strong global demand and falling production elsewhere.

"Saudi Arabia's proposed output addition will only go some way in offsetting the significant output losses in other OPEC nations like Nigeria," said Barclays Capital analyst Kevin Norrish in a research note.

James Cordier, president of Tampa, Florida-based trading firm Liberty Trading Group and OptionSellers.com, said Saudi Arabia has "to increase by north of 1 million barrels per day" to have an impact on prices, "and the market doesn't think they have it."

Saudi production hikes can actually push oil prices higher by stoking concerns about spare oil capacity - the reserves Saudi Arabia holds out of production in the event of an unexpected global supply shortfall.

"The last time Saudi Arabia made such a move, in 2004, traders bid crude higher because of concerns of insufficient spare capacity," Armstrong said.

According to the International Energy Agency, OPEC spare capacity fell below 2 million barrels a day in May for the first time since 2006. The majority of that - about 1.45 million barrels a day - was in Saudi Arabia.

In other Nymex trading, July gasoline futures rose 3.36 cents to $3.4962 a gallon, while July heating oil futures rose 7.32 cents to $3.91 a gallon.

July natural gas futures rose 30.7 cents to $12.932 per 1,000 cubic feet.

Anadarko Petroleum Corp. said Monday that natural gas production from a project in the deep waters of the Gulf of Mexico has been restored, hitting a gross rate of about 900 million cubic feet per day. Output from the Independence Hub was halted April 8 after a pipeline leak was found.

[mcv57]

RBS issues global stock and credit crash alert
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 12:19am BST 19/06/2008


Have your say Read comments

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank''s credit strategist.

A report by the bank''s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

REALLY DOES NOT MATTER AT THIS POINT!

[noloyalisti]

The problem is that the whole reason for the disaster in the Middle East is so that the greedy wasteful Americans coudl continue to drive their Suburbans to the shopping malls in the suburbs.

The oil corporations are sitting on oil and oil leases so that the prices continue to rise. How is a decision for more drilling going to help? And how about the fact that more drilling adds to consumption and global warming. Drilling offshore or in the Arctic is a stupid GOP war-mongering Reaganesque nightmare for the environment.

[labrat9999]

Say I have an idea...why don''t we drill for oil in Alaska? What do you mean that''s not the solution? According to my plan it will only take 5 to 10 years to get that oil! So what''s wrong with that? You ought to see my math on how much the Iraq war will cost...no don''t worry, once the Iraqi people are free of Saddam they will be throwing flowers at our boys in uniform and the gas they sell will pay for the war. Sound familiar? Vote Republican and you''ll hear more of the same!!

[noloyalisti]

Mission Accomlished!!! Don''t think for a second this was not part of the Rove-Bush-Cheney-McCain neo con men plan. They have the oil companies playing us for the fools we are. Time for general strikes yet to take back our country?

[deacon20081]

I can see it now "Next Up In The NEWS "Corn Crops destroyed in Iowa" "Ethanol production is ramped up" "Food Prices Triple"
"Exxon to accept "Clear" Car Titles as collatoral for Fill Up''s at All Stations" "George Bush Declares Matrial Law and Suspends Elections"
" False Flag Ops coming to a location near you"

[chenz66]

I hear the Saudie prince has a case of indigestion. Better raise the cost of oil just in case!

[midland666]

Bring on the Amero, Bring on the north american Union,

[aisdoomed]

I live near the Mexican border,where a gal of gas is $2.58..love it!!

[petro49l]

The Amazonian rain forests could return in South America. Equipment, labor, and money would regenerate the ecology. American Oil Companies provide revenues by drilling petroleum from the ocean floor. Governments lease the property to the oil business. Arab oil wells are dry, low grade, and expensive. Why not go to a place where the oil is top quality, easily transported, and reasonably priced?

[intheshade-2009]

One big influence on oil prices and the value of the dollar is the embargos on Iran. We can all see their response; Iran has pulled their money out of the west and are investing it in Russia, China and the Far East. They won''t be selling oil to the west, because the west might freeze the payments for their oil. They will be selling mainly to China and India. They wont be buying EU or US goods, because the money they use to pay for their purchases might be frozen. They will only buy goods from Russia and China, the same place the EU and the US buys their goods. Iran has lost nothing. We loose Iranian investment, Iranian oil, and foreign custom for our goods and services. The Bush oil companies win because the loss of Iranian oil on the western market will drive our prices even higher. I can see why the Russians and Chinese go along with this. This plan has all the hallmarks of the genius, George W. Bush.