[UNITED STATES] Oil Rises on Dollar's Drop, Mideast Tensions. U.S. Commodities

Crude oil rose as the weaker dollar enhanced the appeal of commodities as a currency hedge and the New York Times reported that Israel held a rehearsal for a potential bombing attack on nuclear targets in Iran.

Oil prices have almost doubled in the past year as investors sought refuge from a declining dollar, which fell again today after traders pared bets the Federal Reserve will raise interest rates on June 25. Iran, OPEC's second-biggest oil producer, would respond to an Israeli attack with a ``heavy blow,'' a senior cleric said.

``The only way to increase the value of the dollar is by increasing interest rates, which doesn't look likely,'' said Nauman Barakat, a senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The simulated attack of Iran by Israeli warplanes is certainly not going to reduce geopolitical tensions.''

In other markets, coffee jumped the most in nine months on reduced shipments from Brazil, the biggest grower. Cattle also climbed. The UBS Bloomberg Constant Maturity Commodity Index gained 18.63 to 1,655.50 after reaching a record 1,668.25.

Crude oil for July delivery rose $2.69, or 2 percent, to $134.62 a barrel on the New York Mercantile Exchange. Prices declined 24 cents this week. Futures climbed to a record $139.89 on June 16.

In the first 19 days of June, Brazil's exports of arabica beans, the main variety traded in New York, fell 10 percent to 871,402 bags from the same period in May, according to the country's Coffee Exporters Council.

``The coffee beans haven't been flowing,'' said Boyd Cruel, an analyst with Alaron Trading in Chicago. A lack of selling is supporting prices, he said.

Coffee futures for September delivery rose 7.05 cents, or 5.1 percent, to $1.467 a pound on ICE Futures U.S., the former New York Board of Trade. The percentage gain was the biggest since Sept. 17. Earlier, the price reached $1.485, the highest for a most-active contract since March 17. Coffee gained 7.2 percent this week and 25 percent in the past year.

Cattle rose to the highest since at least 1986 as U.S. beef prices surged and high corn costs prolong losses for feedlots, encouraging some producers to shrink their herds.

Wholesale beef prices are the highest in 13 months, and domestic shipments of select and choice cuts yesterday totaled 14.9 million pounds, the most since Jan. 24, U.S. Department of Agriculture data show. Feedlot operators cut purchases of young cattle by 12 percent in May from a year earlier, the agency said after markets closed. Analysts projected a 8.9 percent drop.

``When grain prices are this high, the cattle should be staying out in the pasture,'' said Mark Schultz, a vice president at Northstar Commodity Investments LLC in Minneapolis. Livestock producers will ``try to keep them in the pasture longer, to feed them less corn,'' he said.

Cattle futures for August delivery rose 1.4 cents, or 1.4 percent, to $1.0485 a pound on the Chicago Mercantile Exchange, after earlier reaching $1.0615, the highest for a most-active contract since at least April 1986.

Commodities settled as follows:
Precious metals: August gold down 50 cents to $903.70 an ounce July silver down 7.3 cents to $17.397 an ounce July platinum up $6.60 to $2,062.40 an ounce September palladium unchanged at $479.20 an ounce

Livestock: August live cattle up 1.4 cents to $1.0485 a pound August feeder cattle up 2.475 cents to $1.13575 a pound August lean hogs up 2.925 cents to 78.375 cents a pound July pork bellies up 0.775 cent to 72.95 cents a pound

Grains: November soybeans down 12.5 cents to $15.09 a bushel December corn down 6 cents to $7.555 a bushel September wheat down 14.5 cents to $8.8425 a bushel December oats up 3.25 cents to $4.4525 a bushel

Food and Fiber: September coffee up 7.05 cents to $1.467 a pound September cocoa up $19 to $3,125 a metric ton December cotton up 0.04 cent to 80.11 cents a pound October sugar up 0.37 cent to 13.08 cents a pound September orange juice up 2.25 cents to $1.131 a pound

Energy: July crude oil up $2.69 to $134.62 a barrel July natural gas up 13.3 cents to $12.994 per million British thermal units July heating oil up 5.82 cents to $3.7717 a gallon July gasoline up 8.66 cents to $3.4392 a gallon

Others: September copper up 5.25 cents to $3.8305 a pound September lumber down $4.40 to $263.00 per 1,000 board feet.

Source: Bloomberg|By Mark Shenk

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