Oil Is Little Changed as BP Restarts Pipeline, Dollar Gains

By Angela Macdonald-Smith and Christian Schmollinger
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Aug. 25 (Bloomberg) -- Crude oil was little changed after falling the most in three years as BP Plc restarted flows through a Caspian Sea pipeline and as the dollar gained against the euro.

The Baku-Tbilisi-Ceyhan pipeline, which moves oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, may resume full operations within days after a fire halted exports, a BP spokeswoman said Aug. 23. The number of Americans traveling during the Labor Day holiday is expected to fall for the first time since 2006, AAA said.

``The pipeline opening was a bearish event, and combined with the dollar gains, was responsible for the big move,'' said Toby Hassall, an analyst with Commodity Warrants Australia Ltd. in Sydney. ``More weak macroeconomic data from the U.S. could push the price below $110.''

Crude oil for October delivery was at $115.05 a barrel, up 46 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:55 p.m. Singapore time. It earlier fell as much as 56 cents, or 0.5 percent, to $114.03 a barrel.

Oil lost $6.59 on Aug. 22, or 5.4 percent, to $114.59 a barrel, the biggest drop since Dec. 27, 2004. In dollar terms, it was the biggest decline since Jan. 17, 1991, when U.S.-led forces expelled Iraq from Kuwait. The October contract, which had jumped 4.9 percent the previous day, still rose 0.6 percent for the week.

``The pipeline restart was a contributing factor, putting more supply in the market,'' said Jonathan Barratt, managing director of Commodity Broking Services in Sydney. ``Oil is trading in a very volatile, wide range. The volatility is telling me that a base is trying to form'' and prices won't sink much further, he said.

Dollar Gains

The euro fell against the dollar and the yen on speculation declines in German business confidence will discourage the European Central Bank from raising interest rates.

Against the euro, the dollar rose to $1.4726 at 10:04 a.m. in Tokyo from $1.4793 late in New York on Aug. 22.

The euro-dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

BP, Europe's second-largest oil company, StatoilHydro ASA and partners cut output at Caspian oil fields following the closure of the 1,768-kilometer (1,100-mile) Baku-Tbilisi-Ceyhan link on Aug. 5. The pipeline is used to carry oil from Azerbaijan through Georgia to Turkey, where it's loaded onto tankers for U.S. and European markets.

BP is ``carrying out integrity testing on the pipeline,'' Tamam Bayatly, a company spokeswoman, said by telephone from Baku on Aug. 23. She didn't specify a date for full production, due this week.

Drivers Decline

Brent crude oil for October settlement was at $114.42 a barrel, up 50 cents, at 2:56 p.m. Singapore time on London's ICE Futures Europe exchange. It earlier fell as much as 92 cents, or 0.8 percent, to $113 a barrel.

The number of Americans traveling more than 50 miles (80 kilometers) from home over Labor Day, the holiday that marks the end of the U.S. summer driving season, will fall by 0.9 percent from last year, AAA said in a statement on Aug. 22.

Travelers are concerned about the faltering U.S. economy and increases in gasoline and airline prices and are considering alternatives to flying and driving, AAA President Robert L. Darbelnet said.

About 28.64 million U.S. citizens will drive to their holidays, down 1.1 percent from last year, the association said. The number of travelers planning to fly will fall 4.5 percent versus the same time a year ago.

Retail unleaded gasoline prices averaged $3.69 a gallon on Aug. 21, up 33 percent from the same time last year. It reached a high of $4.11 a gallon on July 16.

Traders Reverse

Hedge-fund managers and other large speculators reversed from a net-short position to a net-long position in New York crude-oil futures in the week ended Aug. 19, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 11,659 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Last week, traders were net-short 9,130 contracts.

OPEC's oil supply will probably increase in August by 400,000 barrels a day, or 1.2 percent, as Iran releases crude held in storage, according to preliminary estimates from PetroLogistics Ltd.

The 13 members of the Organization of Petroleum Exporting Countries will provide 32.9 million barrels daily this month, compared with 32.5 million a day in July, PetroLogistics founder Conrad Gerber said by telephone from Geneva. OPEC contributes more than 40 percent of the world's oil.

To contact the reporters on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net