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The Honolulu Advertiser
Updated at 4:42 a.m., Monday, July 14, 2008

Oil prices creep back over $145 a barrel

Associated Press

NEW YORK — Oil prices crept back above $145 a barrel today, recovering from earlier declines as ongoing supply concerns and a mixed dollar gave traders enough reason to keep prices high.

The gains came as the White House said President Bush plans to lift an executive ban on offshore oil drilling. Such a move will not ease tight global supplies in the short term, however, because a Congressional prohibition remains in place and any new wells would take months, if not years, to complete.

Light, sweet crude for August delivery gained 55 cents to $145.63 a barrel on the New York Mercantile Exchange. Earlier Monday, the contract had dipped as low as $142.49.

The contract rose to a trading record of $147.27 a barrel on Friday before closing just down from Thursday's settlement record.

At the gas pump, prices hit a new U.S. record just a tenth of a penny shy of $4.11 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Retail diesel prices are also at an all-time high, of $4.824 a gallon.

The U.S. Federal Reserve said Sunday it would lend if necessary to major U.S. government-backed mortgage giants Freddie Mac and Fannie Mae, which have seen their stock prices plummet amid subprime loan turmoil. The Treasury Department also said it would seek congressional approval to make a possible equity investment in the two companies.

"The Fed action on Fannie and Freddie is a short-term positive because it prevents a credit meltdown," said Victor Shum, an analyst with energy consulting firm Purvin & Gertz in Singapore. "But longer-term, it shows the extent of the problem facing the U.S. economy."

The moves helped shore up confidence in the dollar, which gained ground against the euro but was modestly lower against the yen.

Investors have been buying dollar-denominated crude contracts as a hedge against inflation and a weakening dollar, pushing the price of oil to about double in the past year. When the dollar strengthens, such currency-related buying often unwinds.

Markets will be keeping a close eye on this week's testimony before Congress by U.S. Federal Reserve chairman Ben Bernanke, looking for signs, among other things, of which direction interest rates could take in the coming months.

"The stress in financial markets should be a dominant market-making influence this week," said Olivier Jakob at Petromatrix in Switzerland.

Fears that a strike by Brazilian oil workers will cut supplies helped crude prices rebound Monday.

About 2,500 workers in the Campos Basin, which produces more than 80 percent of Brazil's oil output, began a strike Monday to demand that state-run oil company Petrobras give them an extra day off at the end of each two-week shift on the platforms.

"Supply-side concerns in Brazil, Iran and Nigeria are putting a high floor on prices," Shum said. "We see limited downside risk and expect higher highs in the coming weeks."

Iranian officials vowed on Sunday that the Islamic Republic would fight back against any attacks on it and "cut off the hands" of the invaders. The comments came amid heightened speculation that Israel and the United States will attack Iranian targets to destroy what they say are Tehran's suspicious nuclear programs.

Nigeria's main militant group said last week it planned to resume attacks in the oil-rich Niger region because of a British pledge to help support the government in ending the conflict there.

Iran is OPEC's second-largest oil exporter, while Nigeria is Africa's largest oil producer.

In other Nymex trade, heating oil futures rose 0.51 cents to $4.0817 a gallon (3.8 liters) while gasoline prices fell 1.05 cents to $3.5527 a gallon. Natural gas futures were down 3.3 cents to $11.871 per 1,000 cubic feet.

In London, August Brent crude was down 24 cents to $144.25 a barrel on the ICE Futures exchange.