Oil Is Little Changed as Dollar Nears Record Low Against Euro

(Bloomberg) -- Crude oil was little changed in New York after rising for the first time in four days as the dollar fell to within a cent of its record low against the euro, prompting investors to buy commodities as an inflation hedge.

The dollar dropped on speculation that the Federal Reserve will lower interest rates this month, sending gold and platinum futures to records. Crude prices also increased on expectations that fuel consumption will surge this week as colder weather moves across the U.S.

``What we are seeing in the oil market is part of an overall commodity rally,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``Gold has already surged to another record and all of the other metals and energy markets are following.''

Crude oil for February delivery was unchanged at $94.20 a barrel on the New York Mercantile Exchange at 10:12 a.m. in Sydney. Yesterday, the contract gained $1.51, or 1.6 percent. Futures reached a record $100.09 a barrel on Jan. 3.

Brent crude for February settlement rose $1.85, or 2 percent, to close at $92.92 a barrel on London's ICE Futures Europe exchange. Futures touched $98.50 on Jan. 3, the highest intraday price since trading began in 1988.

A lower dollar makes oil cheaper in countries using other currencies. West Texas Intermediate, the New York-traded crude- oil benchmark, is up 78 percent from a year ago in U.S. dollars. Oil is up 54 percent in euros, 78 percent in British pounds and 60 percent in yen.

Falling Dollar

The dollar fell as low as $1.4915 against the euro yesterday, the weakest since declining to a record low on Nov. 23 of $1.4967, and traded at $1.4866 at 10:16 a.m. in Sydney. It depreciated the most against the yen since Jan. 2, to 108.11 from 108.84.

``I am worried by the brutality of these price rises that directly hurt growth and purchasing power, not only in France and Europe, but even more in poor countries without oil,'' French President Nicolas Sarkozy said in a speech yesterday to business leaders in Riyadh.

The National Weather Service yesterday forecast below-normal temperatures in all of the lower 48 states, except Florida, from Jan. 19 to Jan. 23. Home-heating demand in the Northeast, the region responsible for 80 percent of U.S. heating-oil use, will be 10 percent above normal for the next week, said Weather Derivatives, a forecaster in Belton, Missouri.

The Organization of Petroleum Exporting Countries, which produces more than 40 percent of the world's oil, will assess winter oil demand, global economic growth and decide on production targets. The group meets Feb. 1 in Vienna.

Qatari Comments

``OPEC are only oil producers, they are not fixing prices. They can't control the market forces,'' Qatari Energy Minister Abdullah al-Attiyah told reporters in Doha, Qatar yesterday. ``They can't control the geopolitics. They can't control the speculation.''

OPEC members produced an average 32.07 million barrels a day last month, up 370,000 barrels from November, according to a Bloomberg News survey of oil companies, producers and analysts.

``OPEC, in particular Saudi Arabia, could increase production, which would eventually lead prices lower, but on a day-to-day basis they have no control on prices'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Royal Dutch Shell Plc, Europe's largest oil company, halted crude exports from the Forcados terminal in Nigeria. The stoppage, known as a force majeure, was declared starting Jan. 11 on deliveries in January and February, Rainer Winzenried, a company spokesman, said yesterday. The action follows a Jan. 9 attack on oil-export and water-discharge pipelines, Winzenried said.

Force majeure is a legal clause that allows a company to miss contracted deliveries because of circumstances beyond its control.

MEND Attacks

The Movement for the Emancipation of the Niger Delta, a Nigerian militant group, said its allies blew up an oil tanker on Jan. 11 following a pledge by the organization to ``rock'' the global oil market through sabotage attacks. Violence by militants has cut Nigeria's oil output by 20 percent since the start of 2006. Nigeria is Africa's biggest crude-oil producer.

Hedge fund managers and other large speculators have increased bets on rising oil prices during the past three weeks, according to U.S. Commodity Futures Trading Commission data.

The net-long position in New York oil futures rose 9 percent to 94,923 contracts in the week ended Jan. 8, the commission said last week. Long positions are bets that prices will rise.