(Updates prices in paragraph 2; adds Brent prices)
By Jonathan Leff
SINGAPORE, June 2 (Reuters) - Oil prices were little
changed below $128 a barrel on Monday, with traders tracking
the dollar for direction as fleeting Tropical Storm Arthur
marked the start of the Atlantic hurricane season, shutting two
Mexican oil ports.
U.S. light, sweet crude oil futures <CLc1> were up 8 cents
to $127.43 a barrel by 0403 GMT. Prices fell by nearly $5 last
week as traders took profits from the previous week's record
high above $135 on concerns over demand.
London Brent <LCOc1> was steady at $127.78.
The dollar inched down against the yen <JPY=> early on
Monday, but market fundamentals also vied for traders'
attention.
Tropical Storm Arthur became this season's first in the
Atlantic at the weekend, opening a June-November hurricane
period that forecasters expect to be more active than usual,
threatening U.S. and Mexican oil facilities. []
Although it quickly weakened into a tropic depression,
Arthur forced authorities to shut two of Mexico's three main
crude oil ports as a precaution. The three ports ship about 80
percent of Mexico's crude exports, most of which goes to U.S.
refineries.
State oil monopoly Pemex says its export volumes are rarely
hurt by temporary port closures, as it reschedules delayed
shipments once the weather clears.
"In the near term I think we'll be looking at issues around
supply, the potential for disruption in key regions," said
Gerard Burg, commodities analyst at National Australia Bank,
noting the market will be more sensitive during the summer
driving season.
"The peak (of the hurricane season) isn't until
September/October but obviously that'll be a concern later into
the third quarter."
OFF PEAKS
Oil hit an all-time high of $135.09 a barrel on May 22,
driven by rising flows of cash from investors and concerns
supplies will struggle to match demand longer term, but a
series of fuel price hikes across Asia and protests in Europe
last week shifted focus to the potential for weakening
consumption.
Demand in consuming nations such as the United States and
Britain has already showed signs of faltering under the weight
of rising fuel costs, and some analysts are concerned demand in
some Asian countries could be hit as governments cut subsidies.
While the world's number-two consumer China is resisting
raising prices until after the August Olympics, other countries
including Taiwan, Indonesia and Sri Lanka have been forced to
hike pump rates as governments struggle to fund subsidies.
India is expected to raise prices slightly this week.
With the economic outlook shaky and demand for oil under
pressure, OPEC has resisted calls to pump more crude, saying
that the weak dollar, speculations and other factors -- not a
shortage of supply -- are behind the one-third surge in prices
this year.
OPEC President Chakib Khelil reiterated on Sunday the group
would not make a decision on output policy ahead of its next
meeting in September. []
Iraq's oil production rose to a post-war high of over 2
million barrels per day (bpd) in May, Oil Minister Hussein
al-Shahristani told Reuters in an interview. []
Oil traders are also bracing for the possibility of more
surveillance of their markets from U.S. regulators, under
political pressure to stem the rise in prices, a move they fear
may shake some speculators out of the market.
The Commodity Futures Trading Commission said last week
that it was investigating oil-market trading and beefing up
reporting requirements. The New York Times reported on Saturday
that the CFTC will unveil policy changes next week.
[]
Crude oil speculators on the New York Mercantile Exchange
cut their net long positions in half last week as prices began
to fall, according to CFTC data. Net crude long positions fell
to 25,867 in the week to May 27, from 50,060. []
(Additional reporting by Maryelle Demongeot; Editing by
Michael Urquhart)
