Oil Is Steady as Dollar Gains, Hurricane Ike Heads Toward Gulf

By Mark Shenk and Samantha Zee

Sept. 9 (Bloomberg) -- Crude oil was little changed as the dollar rose against the euro and Hurricane Ike headed toward the Gulf of Mexico.

The U.S. currency strengthened to the highest since October 2007 as the government's takeover of Fannie Mae and Freddie Mac encouraged investors to move funds into the stock market. A rising dollar curbs the appeal of commodities as an inflation hedge. Oil prices were supported by forecasts Hurricane Ike will enter the Gulf and may threaten oil rigs.

``The market's more focused on the weak economy and rising dollar than on the threat of a disruption from storms,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``The dollar got a lot stronger on the Fannie Mae and Freddie Mac news.''

Crude oil for October delivery rose 37 cents to $106.71 a barrel at 8:57 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 39 percent from a year ago. Yesterday, October crude futures rose 11 cents to settle at $106.34 a barrel.

The dollar traded at $1.4128 per euro at 6 a.m. in Tokyo, after rising 1 percent yesterday when it touched $1.4054, the strongest since Oct. 9. The dollar was at 108.26 yen, following a 0.5 percent gain yesterday.

``It seems you have to be a currency trader these days,'' Bentz said. ``Being an oil guy isn't enough anymore.''

Across Cuba

Ike weakened to Category 1 on the 5 step Saffir-Simpson scale of intensity, with sustained winds dropping to 80 miles (130 kilometers) per hour, the U.S. National Hurricane Center said on its Web site at 5 p.m. Miami time. Ike was moving west across Cuba at 14 mph and is forecast to enter the southeastern Gulf late tonight.

Brent crude oil for October settlement declined 65 cents, or 0.6 percent, to settle at $103.44 a barrel on London's ICE Futures Europe exchange yesterday, the lowest since April 3. The contract has dropped eight days, the longest stretch since December 2006.

The 13 members of the Organization of Petroleum Exporting Countries, which supply more than 40 percent of the world's oil, probably will keep producing at a near-record pace as $106-a- barrel crude oil squeezes the global economy. The group is meeting today in Vienna.

``We have to discuss it with our colleagues the ministers, but we don't think there's a requirement for decreasing production,'' Kuwaiti Oil Minister Mohammed Al-Olaim said boarding a flight for Vienna.

Some members including Iran and Venezuela have asked the group to consider output cuts following the 28 percent decline in prices from their record $147.27 a barrel on July 11.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.