(Updates throughout, previous SINGAPORE)
By Barbara Lewis
LONDON, June 9 (Reuters) - Oil eased on Monday after the
biggest one-day price gain in the history of the market left
traders and analysts divided over the explanation.
U.S. light, sweet crude for July delivery <CLc1> fell by
$1.64 to $136.90 by 0940 GMT, while Brent futures <LCOc1>
dropped $2.09 to $135.60.
U.S. prices surged by nearly $11 on Friday to a new record
above $139 a barrel, taking two-day day gains to more than $16 a
barrel and reversing two weeks of losses.
Frantic buying was triggered by a range of factors,
including a forecast by investment bank Morgan Stanley that oil
prices could top $150 a barrel by the July 4 U.S. holiday, as
well as by a falling U.S. dollar.
Goldman Sachs' global head of commodities research Jeffrey
Currie on Monday reinforced Morgan Stanley's view, telling a
conference "demand for oil is weak, but supplies are even
weaker."
"I would suggest that the likelihood of that happening
sooner has increased tremendously ... some time in summer,"
Currie said with reference to oil at $150.
Oil's six-year rally has gathered pace this year, with
futures markets climbing by around 40 percent since January.
The weakness of the U.S. currency has been a major factor
behind this year's commodity price gains as dollar-denominated
raw materials are relatively cheap for non-dollar buyers and
offer investors a potential hedge against inflation.
The dollar plunged on Friday after U.S. economic data showed
the biggest jump in the U.S. unemployment rate for 22 years,
denting expectations the Federal Reserve would raise interest
rates.
By contrast, Jean-Claude Trichet, head of the European
Central Bank, mooted the prospect of higher interest rates in
the euro zone, pushing the single European currency higher
against the dollar <EUR=>.
"Trichet has managed what no war, no hurricances, no OPEC
has ever managed to do," Olivier Jakob of Petromatrix said, with
reference to oil's lurch higher.
SPECULATION?
While many commentators say there is now a large speculative
element in oil prices, the major bulls say fundamentals of
supply and demand will remain tight for the foreseeable future.
They say supply will struggle to grow and demand will stay
high, driven by developing countries, even if high prices have
reduced consumption in the West, notably in the world's biggest
energy consumer the United States.
"What's driving this ultimately is compound consumption. You
can't put 40 million cars a year on the road and think we're
going to consume less," said Greg Smith, who manages $500
million in futures as the head of fund Global Commodities in
Australia.
OPEC ministers have said they see no need to pump more oil
as there is enough oil in the market.
Saudi Arabia, the only OPEC member with capacity to boost
output quickly and significantly, has repeatedly said there was
no fundamental explanation for this year's oil rally.
At weekend talks between Saudi Oil Minister Ali al-Naimi and
his Pakistani counterpart the two agreed the price rise was
unjustified, the official Saudi Press Agency reported.
Nigerian Oil Minister Odein Ajumogobia on Monday said
calling an emergency session of the Organization of the
Petroleum Exporting Countries, which is not scheduled to hold a
formal meeting until Sept. 9, would only add to the problem.
"This sort of volatility is not good for anyone. An
extraordinary meeting of OPEC will only further fuel speculation
in my view," he said.
(Additional reporting by Jonathan Leff, Bernard Woodall and
Ramthan Hussain; Editing by James Jukwey)
