Crude Oil Falls as Stronger Dollar Dims Commodities' Appeal

By Alexander Kwiatkowski

Sept. 11 (Bloomberg) -- Crude oil fell, giving up earlier gains, as the dollar rose to a one-year high against the euro, reducing the appeal of commodities as a hedge.

Oil fell after the dollar rose to a one-year high against the euro on speculation that growth in Europe will slow more than in the U.S. Investors looking to hedge against the dollar's decline helped lead crude oil and other commodities to records earlier this year. The situation reversed in the past month as the dollar rallied against the euro.

``The sentiment in the market is very negative at the moment since demand for oil and commodities has declined sharply,'' said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. ``Quite a lot of investors are pulling out of commodities.''

Crude oil for October fell as much as 73 cents, or 0.7 percent, to $101.85 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $102.06 at 9:19 a.m. London time. It earlier rose as much as $1.37 on concern Hurricane Ike would threaten oil production as it enters the Gulf of Mexico.

Crude has fallen about 30 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduce demand for fuels.

The dollar climbed to $1.3924 per euro, the strongest since Sept. 18, 2007, before trading at $1.3930 as of 8:57 a.m. in London from $1.3998 late yesterday in New York.

Hurricane Ike's eye was estimated to be about 645 miles (1,040 kilometers) east of Brownsville, Texas, and moving west- northwest at 9 miles per hour, the U.S. National Hurricane Center said in an advisory at 1 a.m. Houston time today.

Ike strengthened to a Category 2 hurricane with sustained winds of 100 mph, up from 80 mph yesterday. The storm is forecast to sweep through the center of the Gulf, missing the offshore Louisiana oil and natural gas fields.

Brent crude oil for October settlement fell as much as 79 cents, or 0.8 percent, to $98.18 a barrel on London's ICE Futures Europe exchange. It was at $98.38 at 9:21 a.m. London time.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net