Oil Falls More Than $3 as BP Restarts Pipeline, Dollar Rises

Crude oil fell more than $3 a barrel, the biggest decline in four weeks, after BP Plc restarted a North Sea oil pipeline and the dollar strengthened, reducing the appeal of commodities to investors.

``The Forties Pipeline System is back in operation,'' Richard Grant, a BP spokesman in Aberdeen, Scotland, said today. The pipeline closed April 27 during a two-day strike at the Grangemouth refinery, which supplies the network with power. The dollar rose to a three-week high against the euro.

``The reopening of the Forties Pipeline is taking fear out of the market,'' said Rick Mueller, director of oil practice at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``The dollar is rising as well, which is taking some of the financial pressure out of commodity markets.''

Crude oil for June delivery dropped $3.12, or 2.6 percent, to settle at $115.63 a barrel at 2:58 p.m. on the New York Mercantile Exchange, the lowest close since April 17. It was the biggest one-day decline since March 31. Futures surged to a record $119.93 a barrel yesterday. Prices are 74 percent higher than a year ago.

Prices closed above the Bloomberg Trender support line today, as they have since April 7, indicating crude oil will probably extend gains. The Trender is a technical study that signals a price's direction based on the speed and variance of past changes.

Brent crude for June settlement fell $3.31, or 2.8 percent, to settle at $113.43 a barrel on London's ICE Futures Europe exchange. It was also the biggest drop since March 31 and the lowest close since April 17. The contract touched a record $117.56 on April 25.

`Buying-With-Abandon'

``For the first time in weeks we have some bearish factors in the forefront,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``We are finally seeing a stop to the buying-with-abandon.''

Shutting the Forties link forced 70 North Sea fields to halt production of oil and gas. Plans are in place to begin increasing offshore production today and the pipeline will return to full capacity in ``several days,'' Joanne McDonald, a spokeswoman for BP, said earlier.

Record oil prices pushed oil-company profits higher. BP, Europe's second-biggest oil company, posted a 63 percent jump in first-quarter net income to $7.62 billion. Royal Dutch Shell Plc, Europe's biggest oil producer, said profit rose 25 percent to $9.08 billion.

Futures contracts on the Chicago Board of Trade show an 82 percent chance the Fed will trim its target for overnight lending between banks by 0.25 percentage point to 2 percent tomorrow. The European Central Bank has not cut rates because of rising inflation, which has led to the dollar falling against the euro.

Commodity Records

Oil has risen 42 percent and the dollar has dropped 12 percent against the euro since the Federal Reserve began lowering interest rates on Sept. 18. Gold, corn, soybeans and rice also rose to records this year as the dollar dropped.

The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, fell 1.8 percent to 1485.937 today, the lowest since April 11. The index is up 33 percent from a year ago.

An Energy Department report tomorrow will probably show that U.S. crude-oil supplies advanced 950,000 barrels in the week ended April 25 from 316.1 million barrels, according to the median of responses from 12 analysts surveyed by Bloomberg News.

``The dollar's strength and news that the Forties pipeline will be up and running in a couple days are moving us lower,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``There won't be a major retracement in the near term because of supply disruptions, specifically in Nigeria.''

Exxon Strike

A senior Nigerian oil workers' union continued its strike against a unit of Exxon Mobil Corp. for a sixth day, halting 860,000 barrels a day. Olusola George-Olumoroti, chairman of the branch of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan, said the union will meet today with Exxon, government officials and the head of the state-owned oil company.

The strike, combined with a one-week spree of militant attacks against four crude-oil pipelines operated by a Royal Dutch Shell Plc venture, has cut Nigerian oil output by about 50 percent, allowing Angola to overtake it as Africa's biggest oil producer. Violence by militants in the Niger River Delta has cut Nigeria's oil output since the start of 2006.

``Exxon's problems will probably be temporary but that's not the case with Shell,'' McGillian said. ``The situation in the delta has been a bullish factor in the market for two years now and there are no signs that it will end any time soon.''

President George W. Bush dismissed calls by Congress to stop oil purchases for the Strategic Petroleum Reserve at a press conference today at the White House. A group of 14 Senate Republicans earlier asked Bush to stop filling the reserve to ease price pressures, matching a similar request previously made by Democrats in the House.