Oil Falls $5 as Dollar Gains on Signs of Support by G-8 Leaders

Crude oil fell more than $5 a barrel as the dollar rose to a one-week high against the euro amid speculation that leaders from the Group of Eight industrialized nations will signal support for the currency.

Oil fell for the first session in four as commodities such as gold and silver also dropped. Investors used commodities to hedge declines in the U.S. currency as it reached a record low against the euro this year. President George W. Bush said yesterday that ``the U.S. believes in a strong-dollar policy.''

``Whenever the dollar strengthens, that makes commodities more expensive for everyone else in the world,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``It makes them less willing to buy oil.''

Crude oil for August delivery fell $5.49, or 3.8 percent, to $139.80 a barrel at 12:03 p.m. on the New York Mercantile Exchange. Oil reached a record $145.85 on July 3. Prices have more than doubled in the past year. U.S. markets were closed during the U.S. Independence Day holiday on July 4.

Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. will also likely consider the effect of high energy prices on the global economy at their three-day summit in Japan.

Italian Prime Minister Silvio Berlusconi said today that deposits required to trade oil futures should be raised to discourage speculation, amid fears by ``some'' G-8 leaders that oil prices will reach $200 a barrel.

``I would be very surprised if there's not a reference to oil prices as a risk to the world economy'' in the summit's final statement, said Tim Evans an energy analyst for Citi Futures Perspective in New York. ``At the same time, I don't really expect something substantial to come out of the G-8 meeting in terms of global energy policy.''

Euro Falls

The euro fell to $1.5611 against the dollar, the lowest since June 25, before trading at $1.5651 as of 11:32 a.m. in New York.

``The dollar is responding to happy talk coming out of the G-8,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.

Commodities fell the most since March, led by grains and energy. The Reuters/Jefferies CRB Index of 19 raw materials tumbled 2.6 percent to 459.91 at 10:56 a.m. New York time. A close at that level would mark the biggest drop since March 19. The gauge climbed to a record 473.97 on July 3.

Iranian Talks

Also pressuring prices were comments by Iranian Foreign Minister Manouchehr Mottaki on CNN yesterday that talks about its nuclear program are ``in a new environment'' and ``new approaches'' with the U.S. are possible. Speculation of an attack on Iran that could disrupt exports from OPEC's second-largest producer helped push oil to a record last week.

Iran's nuclear program is an ``unalienable right,'' President Mahmoud Ahmadinejad said today, encouraging all countries to use atomic power to meet their energy needs. He spoke with Radio Televisyen Malaysia, the state-run broadcaster and Bernama, the official news agency in Kuala Lumpur. He is attending a summit of the Eight Islamic Developing Countries.

Heating oil for August delivery fell as much as 4.1 percent today, and gasoline futures were down as much as 3.8 percent.

The fewest Americans in three years likely traveled over the July 4th weekend as record gasoline prices and a slowing economy forced consumers to curtail spending, according to AAA, the largest U.S. motoring group. The number of people taking trips of at least 50 miles (80 kilometers) from home over the holiday weekend will fall 1.3 percent to 40.5 million, AAA said.

Gasoline Record

Regular gasoline at the pump, averaged nationwide, rose 0.1 cent to a record $4.108 a gallon, AAA said today on its Web site.

``Obviously, there's some selling pressure here, some profit taking going on,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``The gasoline and heating oil are pretty weak.''

Brent crude oil for August settlement fell $3.13, or 2.2 percent, to $141.29 a barrel on London's ICE Futures Europe exchange. Futures climbed to a record $146.69 on July 3.