By Grant Smith
June 20 (Bloomberg) -- Crude oil rose in New York, recovering from yesterday's decline, as the weaker dollar enhanced the appeal of commodities as a currency hedge.
Israel held a rehearsal for a bombing attack on nuclear facilities in Iran, the New York Times reported, adding to concern that conflict may cut supply from OPEC's second-largest producer. Oil fell the most in more than a week yesterday after China unexpectedly raised fuel prices by at least 17 percent.
``We're seeing prices rebound after last night's losses as the euro strengthens and traders believe the longer-term trend is upwards,'' said Andrey Kryuchenkov, an analyst at Sucden (U.K.) Ltd. in London. ``Reports of an Israeli training exercise could be stoking concern about Iranian supplies.''
Crude for July delivery climbed as much as $2.55, or 1.9 percent, to $134.48 a barrel in electronic trading on the New York Mercantile Exchange. It was at $133.19 at 12:41 p.m. London time.
Oil workers at Chevron Corp.'s Nigerian unit plan a disruption on June 23 after talks with management failed to resolve a labor dispute, a union official said. Royal Dutch Shell Plc is assessing the impact of an attack yesterday that closed it 190,000 barrel-a-day Bonga platform off Nigeria.
The threat of further disruptions in Africa's second- largest producer has helped push Brent's premium over New York crude to 45 cents, its highest since Feb. 6. West African exports are priced using Brent.
Oseberg Fire
Brent's premium was also supported by the halt of 150,000 barrels a day of North Sea Oseberg crude for a fifth day following a fire at a StatoilHydro ASA platform.
Brent crude oil for August settlement gained as much as $2.88, or 2.2 percent, to $134.88 a barrel on London's ICE Futures Europe exchange. It was at $134.50 at 12:42 p.m. London time.
An Israeli military exercise involving more than 100 Israeli F-16 and F-15 fighters seems to have been a rehearsal for a bombing attack on Iran's nuclear facilities and long-range conventional missiles, the New York Times reported, citing several unidentified U.S. officials.
The dollar headed for a weekly decline against the euro on speculation the Federal Reserve will hold off from raising interest rates next week to support the U.S. economy. It traded for $1.5620 against the euro at 12:11 p.m. London time, from $1.5493 earlier.
Oil futures climbed to a record $139.89 on June 16 and prices are 91 percent higher than a year earlier.
Jeddah Meeting
Saudi Arabia, the world's largest exporter, is gathering producers, oil companies and consuming governments in Jeddah this weekend to discuss surging prices. The kingdom may announce output increases of between 200,000 and 500,000 barrels a day, according to OPEC and media reports.
``We can call it too little, too late,'' said Farzam Kamalabadi, president and chairman of Future Trends International said in a television interview. ``It's not only the issue of supply and demand. There are the issues of the currency, speculation and on top of this more and more the issue of geopolitics.''
Yesterday, oil in New York dropped $4.75, or 3.5 percent, the biggest decline since March 31.
Oil fell after China's National Development and Reform Commission said the world's second-biggest energy consumer will increase gasoline and diesel prices by 1,000 yuan ($145) a ton.
Merrill Lynch
The move will reduce the country's demand growth by 1.5 percent, according to Merrill Lynch & Co. The U.S. Energy Department in a report on June 10 said China's oil consumption is expected to rise 440,000 barrels to an average 8.02 million barrels a day this year.
The decision may actually bolster demand for crude oil as refiners ramp up output to take advantage of higher processing profits, Lehman Brothers Holdings Inc. and Goldman Sachs Group Inc. said in reports.
In the medium term, the price jumps will only reduce demand growth by 6 percent for 2008, said a briefing note written by Goldman's Giovanni Serio and Samantha Dart.
Last Updated: June 20, 2008 07:43 EDT http://www.bloomberg.com/apps/news?pid=20601072&sid=afxp4NUh3pNk&refer=energy