OPEC Says Oil May Gain on Hedging Against Dollar: Chart of Day

By Will Kennedy and Ahmed Rouaba

Sept. 25 (Bloomberg) -- OPEC President Chakib Khelil said oil prices may rise as investors hedge against a depreciating U.S. dollar.

``The price depends on the dollar, it has nothing to do with oil demand and supply,'' Khelil, who is also Algeria's energy minister, told reporters yesterday in Algiers. ``If the dollar weakens, oil will go up.''

The CHART OF THE DAY shows the correlation between New York oil prices and the exchange rate of the dollar versus the euro. The 6.7 percent one-day gain in November crude futures on Sept. 22 coincided with the largest drop for the dollar versus the euro since the single currency's inception in 1999.

The dollar may get ``crushed'' as the cost of bailing out banks causes U.S. borrowing to balloon, John Taylor, chairman of International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, said earlier this week.

Oil offers investors protection against a weaker U.S. currency because dollar-priced commodities become cheaper to foreign buyers as the dollar drops.

To contact the reporter on this story: Will Kennedy in London at wkennedy3@bloomberg.net; Ahmed Rouaba in Algiers through the newsroom in London at rouaba@hotmail.com.