Monday, July 7, 2008
Oil Falls $3 as Iran Signals Confidence in Talks, Dollar Gains
By Margot Habiby
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July 7 (Bloomberg) -- Crude oil fell more than $3 a barrel after Iran's foreign minister expressed confidence in talks with western governments on the country's nuclear program and the dollar gained before a meeting of Group of Eight leaders.
Oil dropped for the first session in four as Foreign Minister Manouchehr Mottaki told CNN yesterday that talks are ``in a new environment'' and ``new approaches'' are possible. The dollar rose to its highest against the euro in more than a week as G-8 leaders are expected to signal support for the currency.
On the Iran situation, ``there's a new package of incentives, and everybody's talking, and that in itself is a positive,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``The dollar is responding to happy talk coming out of the G-8.''
Crude oil for August delivery fell $3.87, or 2.7 percent, to $141.42 a barrel at 10:07 a.m. on the New York Mercantile Exchange.
Oil reached a record $145.85 on July 3 on speculation any attack on Iran may disrupt exports from Iran, OPEC's second- biggest producer.
``Obviously, there's some selling pressure here, some profit taking going on,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``The gasoline and heating oil are pretty weak.''
Heating oil for August delivery fell as much as 4.1 percent today, and gasoline futures were down as much as 3.8 percent.
Holiday Travel
The fewest Americans in three years likely traveled over the July 4th weekend as record gasoline prices and a slowing economy forced consumers to curtail spending, according to AAA, the largest U.S. motoring group. The number of people taking trips of at least 50 miles (80 kilometers) from home over the holiday weekend will fall 1.3 percent to 40.5 million, AAA said.
Regular gasoline at the pump, averaged nationwide, rose 0.1 cent to a record $4.108 a gallon, AAA said today on its Web site.
``The market is looking a little bit softer this morning as oil breaks below its recent trading range and cooler heads prevail for the time being between Iran and the west,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London.
Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. are meeting in Japan for three days. President George W. Bush said at a news conference in Japan yesterday that ``the U.S. believes in a strong-dollar policy.''
The dollar's gains against the euro dim the appeal of commodities used to hedge declines in the U.S. currency. The euro fell to $1.5611 against the dollar, the lowest level since June 25, before trading at $1.5637 as of 10:07 a.m. in New York.
Costlier Commodities
``So many commodities are denominated in dollars,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``Whenever the dollar strengthens, that makes commodities more expensive for everyone else in the world. It makes them less willing to buy oil.''
Brent crude oil for August settlement fell $2.23, or 1.5 percent, to $142.19 a barrel on London's ICE Futures Europe exchange. Futures climbed to a record $146.69 on July 3.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
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