Crude oil fell more than $4 a barrel in New York after Saudi Arabia's oil minister, Ali al-Naimi, called for a meeting of oil producing and consuming nations to discuss how to deal with record prices.
``The increase in prices isn't justified in terms of market fundamentals,'' the Saudi government said today in a statement distributed by the Saudi Press Agency. Oil climbed $10.75 on June 6, its biggest gain ever, because of a weakening dollar and threats of supply disruptions.
``We are seeing increasing dialogue between producers and consumers, which is positive,'' said Eric Wittenauer, an analyst at Wachovia Securities in St. Louis. ``Thus far we've heard a lot but there's not been much action. I think a lot of what we're seeing today is just a reaction to the exaggerated gain on Friday as the dollar rebounds.''
Crude oil for July delivery fell $4.19, or 3 percent, to $134.35 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures, which reached a record $139.12 a barrel on June 6, are more than double the level of a year ago.
Brent crude oil for July settlement fell $3.90, or 2.8 percent, to $133.79 a barrel on London's ICE Futures Europe exchange. Prices climbed to a record $138.12 on June 6.
``We're getting a bit of a correction after Friday's explosive rally,'' said Tom Bentz, a broker at BNP Paribas in New York. ``It's all about momentum. Once a move gets started, it often goes beyond what reality would dictate.''
Saudi Arabia said it had increased production this month and has told all the oil companies it deals with that it's ready to provide them with additional supplies if needed.
Dollar Rebounds
Crude oil also fell as the dollar climbed against the euro for the first time in three days as U.S. stock indexes advanced. The falling dollar has spurred investors to purchase commodities as a hedge against the U.S. currency's decline. The dollar's drop has helped lead oil, gold and corn to records this year.
The dollar increased 0.7 percent to $1.5662 per euro at 2:34 p.m. in New York, from $1.5778 on June 6.
``The economic crisis in the U.S. caused the dollar to drop sharply and the threats against Iran heightened geopolitical tensions,'' OPEC President Chakib Khelil, said today in Algiers, according to the state-run Algerie Presse Service. ``If it wasn't for these factors, the price of oil would probably be $70 a barrel; the depreciation of the dollar alone is adding $40.''
The next scheduled meeting of the Organization of Petroleum Exporting Countries will be in September. The 13-member group has kept output targets unchanged at its past three meetings. OPEC is responsible for more than 40 percent of global oil output.
Pump Prices
Pump prices in the U.S. passed $4 a gallon for the first time over the weekend. Regular gasoline, averaged nationwide, rose 1.8 cents to a record $4.023 a gallon, AAA, the nation's largest motorist organization, said today on its Web site.
``The fundamentals are incredibly bullish,'' said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. ``Production is falling in many important areas such as Russia and Mexico. Although U.S. consumers are cutting back on gasoline consumption, that's not the case in China.''
China's economy has grown at least 10 percent in each of the past five years, making cars affordable to more people and spurring sales. Chinese vehicle sales have about quadrupled over the past eight years to 8.79 million last year, making the country the world's second-biggest automobile market.
Chinese Demand
``Chinese auto sales are rip roaring,'' Brodrick said. ``Diesel and gasoline demand is surging.''
China caps fuel prices to limit inflation, which reached the fastest pace in 11 years in February. China may spend about $45 billion subsidizing oil refiners for selling fuels at below- market prices, the International Energy Agency said on May 13.
``There's still strength in the gasoil market, which is what I'm keeping my eye on,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``Strong diesel demand and the threat of a strike in Nigeria will keep the bias to the upside this week.''
A union representing senior employees at Chevron Corp.'s Nigerian unit said the company hasn't responded to demands made in an ultimatum that ended yesterday and warned a strike may be imminent. In 2007 Chevron pumped an average of 350,000 barrels of crude oil daily and 14 million cubic feet of natural gas in Nigeria, according to the company's Web site.
``This should be another volatile week,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``Both the bears and bulls should have moments of seeming genius this week.''
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