Oil Is Steady as Russia Ends Action in Georgia, Dollar Drops

By Mark Shenk

Aug. 12 (Bloomberg) -- Crude oil was little changed as Russia called off military action in Georgia and the dollar dropped from a 5 1/2-month high against the euro, curbing the appeal of commodities as an inflation hedge.

Prices rebounded after Russian President Dmitry Medvedev announced the end to the five-day offensive in Georgia, a country that connects the oil-rich Caspian Sea region with world markets. BP Plc stopped pumping oil into a pipeline from Azerbaijan to the Black Sea coast because of concern over security.

``Medvedev's calling for an end of hostilities has taken away some of the appeal of the dollar as a safe heaven,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``This combined with BP shutting a pipeline has pushed prices higher.''

Crude oil for September delivery rose 13 cents to $114.58 a barrel at 9:33 a.m. on the New York Mercantile Exchange. Futures touched $112.48 today, the lowest since May 2. Prices are up 60 percent from a year ago.

``The oil market has been totally focused on the dollar recently,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``The market had been ignoring a number of bullish news items but only rebounded when the dollar fell.''

The dollar declined 0.3 percent to $1.4949 per euro at 9:02 a.m. in New York, from $1.4909 yesterday. It touched $1.4816, the strongest since Feb. 26.

Brent crude oil for September settlement rose 23 cents to $112.90 a barrel on London's ICE Futures Europe exchange. Prices fell to $110.47 today, the lowest since May 2.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.