(Adds comment, updates prices, previous SINGAPORE)
By Santosh Menon
LONDON, June 2 (Reuters) - Oil fell more than $1 to near
$126 on Monday as the U.S. dollar firmed and as the market
shrugged off Tropical Storm Arthur, which marked the start of
the Atlantic hurricane season by shutting two Mexican oil ports.
U.S. light, sweet crude oil futures <CLc1> fell $1.25 to
$126.10 a barrel by 1020 GMT, extending last week's nearly $5
tumble as traders continued to take profits from a recent rally
to a record high above $135.
London Brent <LCOc1> fell $1.28 at $126.50.
"It doesn't look like we are going to see any sharp
movements one way or the other today. We'll probably see just a
continued softening today from the trend we've seen last week,"
said Simon Wardell, oil analyst at Global Insight in London.
The dollar edged up on Monday, even as many investors
awaited U.S. data this week to see if the reports reinforce
expectations for higher interest rates.
The U.S. greenback has rebounded against the euro on the
prospect of the Federal Reserve eventually lifting rates. The
dollar scored back-to-back monthly gains against the euro in
April and May for the first time since early 2007. []
The market shrugged off Tropical Storm Arthur, which formed
one day before the official June 1 start of the Atlantic
hurricane season, but quickly weakened into a tropic depression.
Arthur, the first storm of a June-November hurricane period
that forecasters expect to be more active than usual, forced
authorities to shut two of Mexico's three main crude oil ports
as a precaution. []
State oil monopoly Pemex says its export volumes are rarely
hurt by temporary port closures, as it reschedules delayed
shipments once the weather clears.
OFF PEAK
"In the near term I think we'll be looking at issues around
supply, the potential for disruption in key regions," said
Gerard Burg, analyst at National Australia Bank, noting the
market will be more sensitive during the summer driving season.
"The (hurricane season) peak isn't until September/October,
but that'll be a concern later into the third quarter."
Oil hit an all-time high of $135.09 a barrel on May 22,
boosted 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
has 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 a weak dollar, speculation and other factors and not supply
shortages are behind the one-third surge in prices this year.
Oil traders are also bracing for the possibility of more
market surveillance by 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. []
(Additional reporting by Jonathan Leff and Maryelle Demongeot
in Singapore, editing by James Jukewey)
