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Oil falls as dollar gains, Saudis call for meeting
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NEW YORK - Oil prices dropped Monday on a stronger dollar and a call from Saudi Arabia for a meeting to talk about prices it called unjustifiably high.
The dollar improved against the euro after Treasury Secretary Henry Paulson said he would not rule out intervention to stabilize the U.S. currency. That provided some relief for oil, which is priced in dollars, after a record runup on Friday.
Saudi Arabia called for a meeting of oil-producing countries. A Saudi minister said the kingdom would work with OPEC to "guarantee the availability of oil supplies now and in the future." He also said the current price of oil is unjustified.
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 Friday, oil jumped nearly $11, a single-day record.
A Morgan Stanley analyst's prediction that oil would hit $150 helped drive Friday's rally.
Oil prices have been marching higher since last fall, and sudden drops of $10 or more in oil have been followed by rapid rebounds and new heights. Last week, oil prices rose nearly 14 percent in two days, trading as high as $139.12 a barrel, after slumping more than $13 from a previous record.
In an interview on CNBC Monday, Paulson said he would not rule out the possibility of intervening to stabilize the dollar, although he declined to speculate about what the government might do. The dollar strengthened against the euro on Paulson's comments, sending oil lower.
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.
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