Oil prices retreat as dollar rises

US treasury hints at currency intervention amid Saudi calls for meeting on high prices.

    Oil prices fell to $134 after hitting a record $139 per barrel last Friday [EPA]

    July futures for light, sweet crude fell $4.19 to settle at $134.35 a barrel in volatile trading on the New York Mercantile Exchange on Monday.

     

    On Friday, oil prices had hit a record $139 a barrel after jumping nearly $11 in a single-day record.

     

    The sharp hike had come after the European central bank announced a possible increase in interest rates in July to counter rising inflation, a move that sent the dollar falling against the euro.

     

    Stronger dollar

     

    But Paulson's comments on the US treasury's possible intervention helped the dollar strengthen against the euro on Monday, sending oil lower.

     

    Your Views

    Who do you blame for rising oil prices?

    Send us your views

    Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens.

     

    But on Monday, the effect reversed. The dollar gained ground, making oil less effective as an inflation hedge.

     

    Also, a stronger dollar makes oil more expensive to investors overseas.

     

    Another factor that underpinned Friday's rally was an Israeli cabinet minister's comment that his nation might attack Iran if it did not halt its nuclear programme.

     

    But that prospect appeared to dissipate over the weekend as Israel's prime minister, Ehud Olmert, distanced himself from the comments and other officials noted that the minister had not been expressing official government policy.

     

    Some analysts, however, see warning signs in Friday's bold oil price jump.

     

    "It was a freakish oil market Friday as the market's worst fears – some real and some imagined – exploded into a rhapsody of wild buying," said Phil Flynn, an analyst at Chicago-based Alaron Trading Corp, in a research note.

    SOURCE: Agencies


    YOU MIGHT ALSO LIKE

    How Moscow lost Riyadh in 1938

    How Moscow lost Riyadh in 1938

    Russian-Saudi relations could be very different today, if Stalin hadn't killed the Soviet ambassador to Saudi Arabia.

    Interactive: Coding like a girl

    Interactive: Coding like a girl

    What obstacles do young women in technology have to overcome to achieve their dreams? Play this retro game to find out.

    The War in October: What Happened in 1973?

    The War in October: What Happened in 1973?

    Al Jazeera examines three weeks of war from which both Arabs and Israelis claimed to emerge victorious.