Crude Oil Is Steady on Brazil Supply Concern, Dollar's Rally

By Margot Habiby

July 15 (Bloomberg) -- Crude oil was little changed amid concern that supplies from Brazil may be disrupted and as the dollar strengthened against the euro, reducing the appeal of commodities as a currency hedge for investors.

Oil rose as high as $146.37 a barrel yesterday as employees of Petroleo Brasileiro SA, Brazil's state oil company, began a five-day strike in an area home to more than 80 percent of the country's output. The dollar rallied on U.S. measures to restore confidence in mortgage companies Fannie Mae and Freddie Mac.

A strike would have ``a pretty meaningful impact, especially given that it's a source of crude from the Western Hemisphere from a regime that has a fairly friendly relationship with us,'' said Jeff Spittel, an analyst at Natixis Bleichroeder Inc. in Houston. He said the dollar's gain pressured prices.

Crude oil for August delivery rose 1 cent to $145.19 a barrel at 8 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, it rose 10 cents to settle at $145.18 a barrel. Futures reached a record $147.27 a barrel on July 11 and have risen 96 percent in the past year.


The dollar climbed to $1.5902 per euro at 7:55 a.m. in Sydney from $1.5938 in New York on July 11.

Petrobras has lost about 400,000 barrels a day of output because of the strike in the Campos Basin, the source of about 82 percent of Brazil's production of 1.8 million barrels a day, the country's main oil union said yesterday. The company said it's pumping crude from all but two of 38 offshore platforms affected by the strike.

Brazil Strike

Petrobras exports some of the heavy crude oil from Campos because its refineries aren't fully equipped to handle these grades. It uses the proceeds to buy lighter oil from abroad.

July 13, the company sought and won an injunction from a Brazilian Labor Court preventing strikers from taking control of platforms or preventing management from doing work to maintain platforms and the integrity of wells during the labor action.

U.S. Treasury Secretary Henry Paulson announced measures July 13 to restore confidence in mortgage companies Fannie Mae and Freddie Mac. Oil rose 50 percent this year as a weaker dollar and falling U.S. equities prompted investors to buy commodities.

``The dollar has stabilized against the euro and rebounded somewhat, because the prospects for U.S. financial markets don't look as dire as they did'' last week, said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``We still have some considerable uncertainty out there.''

Atlantic Storm

A low-pressure system over the central Atlantic Ocean may strengthen into a tropical depression ``at any time during the next day or two,'' the U.S. National Hurricane Center said in a statement on its Web site at 2 p.m. New York time. A tropical depression is an organized system of winds with a well-defined center, and maximum sustained winds of 38 miles per hour.

The system, about 1,200 miles (1,930 kilometers) east of the Caribbean's Lesser Antilles islands, is moving west- northwest at 15 miles per hour.

Brent crude oil for August settlement fell 57 cents, or 0.4 percent, yesterday to close at $143.92 a barrel on London's ICE Futures Europe exchange. The August contract, which expires tomorrow, reached a record $147.50 on July 11. The more-widely held September contract fell 24 cents yesterday to $145.33 a barrel.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.