IRANIAN PRESIDENT AHMADINEJAD URGES OPEC TO QUIT PRICING OIL IN U.S. DOLLARS

Currently, oil sold by OPEC nations and traded globally is priced in U.S. dollars. President Ahmadinejad (along with Venezuela's Hugo Chavez) has urged OPEC to quit pricing oil in dollars. If another currency was used instead of the dollar, demand for dollars would decline, leading to further weakening of the already very weak U.S. dollar.

From AP via MSNBC:

According to the Iranian government's Web site, Ahmadinejad told OPEC Secretary General Abdalla Salem el-Badri the cartel "should establish a joint bank as well as having joint currency."

Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned producers because it has contributed to rising crude prices and eroded the value of their dollar reserves.

Iran has repeatedly urged OPEC members to shift sales away from dollar. But Iran's proposal to trade oil in a basket of currencies is not supported by enough OPEC members, which include staunch U.S. allies such as leading producer Saudi Arabia.

U.S. DOLLAR HITS NEW LOW VERSUS EURO

The dollar weakened further Thursday, hitting a new low of $1.5644 to the euro. In addition, Venezuela appears to be experimenting with requiring that payments for oil be made in euros instead of dollars. If this were to catch on and spread to other OPEC nations, demand for the dollar would plummet, causing accelerated weakening of the dollar and further strengthening the euro.

From Reuters:

The dollar extended losses late on Thursday, hitting fresh record lows against the euro, in selling driven by technical factors.

The euro rose to $1.5644 against the dollar for the first time since it was launched, according to Reuters data. It last traded at $1.5627.

Late on Thursday, Reuters reported that Venezuelan state oil company PDVSA is requiring payment in euros in a recently opened fuel export contract, citing a trader who has purchased a cargo under the contract.

PRESIDENT BUSH AND OPEC TRADE BARBS AS OPEC MAKES NO CHANGE IN OUTPUT

Yesterday President Bush criticized OPEC by saying "Understand the consequences of high energy prices. I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices." His statement was likely more than a criticism, it was intended to encourage OPEC to commit to increasing production at its meeting today. It did not work, as OPEC voted to keep output at current levels.

After the OPEC meeting today, OPEC President Chakib Khelil said, "If the prices are high, definitely they are not due to a lack of crude. They are due to what's happening in the U.S. There is sufficient supply. There's plenty of oil there." He went on to say that the global oil market is being impacted by "the mismanagement of the U.S. economy." His mismanagement comment seems to be a reference to the policies that are causing the U.S. dollar to weaken to what some are finding to be uncomfortable levels.

As of 10:15 a.m. Central, light sweet crude it trading at $102.66 on the NYMEX, up $3.14.

From AP via Yahoo:

Khelil said crude stocks were well within their five-year average and the 13-nation group was not inclined to either boost or reduce its current output of about 32 million barrels a day. OPEC satisfies roughly 40 percent of the world's demand for crude.

"In truth, OPEC's decision not to pump more oil is a reflection that supply is relatively good," said Anthony Sabino, a professor of business at St. John's University in New York.

"What is driving oil prices up to the stratospheric level of over $100 per barrel is the U.S. economy, now undeniably in recession," he said. "It's not so much the price of oil is going up -- it's that the value of the U.S. dollar, sad to say, is slumping."

Oil shot up a dramatic 19 percent last month as the falling dollar prompted speculators and other investors to shift cash to crude and other commodities as a hedge.

Key cartel members said this week that prices in the $85 to $90 per barrel range would be optimal.

The 13 OPEC members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

OIL CLOSES OVER $90

From The New York Times:

Oil prices shot past $90 a barrel today on what one analyst described as a “perfect storm” of economic news, ranging from tensions in the Middle East to growing anticipation of a Fed rate cut.

Crude oil futures jumped $3.36 to close at $90.46 a barrel, exceeding the highs reached last week, though still shy of the inflation-adjusted record price of $101.70 set in 1980.

Concerns over supply levels spurred the price increase after the Energy Department reported yesterday that crude oil stockpiles fell last week and investors learned that OPEC shipments from the Middle East were expected to slow. Fewer oil supplies and steady demand mean that oil prices will go up.

Military tensions between Turkey and Iraqi Kurds also contributed to the sudden spike, along with a decision by the United States to impose sanctions against oil-rich Iran. Prices were also pushed up by a weak dollar and expectations that the Federal Reserve will cut its benchmark interest rate next week, analysts said.

“It’s almost like a perfect storm,” said Fadel Gheit, managing director of oil and gas research at OppenheimerFunds.

OPEC CONSIDERS PRODUCTION INCREASE AS OIL TOPS $77 PER BARREL

From Reuters:

OPEC was meeting on Tuesday to consider a modest rise in oil output proposed by Saudi Arabia and other Gulf Arab states in a gesture to consumers worried by the economic impact of $77 oil and rapidly diminishing stocks.

But the plan to add 500,000 barrels per day of oil had yet to convince all OPEC ministers and discussions were continuing, a delegate said. Venezuela, Algeria and Libya said ahead of the talks they were not in support of increasing supplies.

Industrialized consumer nations are forecasting their crude oil stocks will fall to the bottom of the five-year average range by January unless OPEC pumps more crude oil, and fast.

U.S. crude oil is above $77, close to its August 1 record high of $78.77 a barrel, following attacks on oil and natural gas pipelines in Mexico, the world's fifth largest crude exporter.