Oil extends gains on supply concerns, weak dollar

Oil rose towards $133 a barrel on Monday, extending the previous session’s gains, due to a supply outage at the large Statfjord oilfield in the North Sea and a weak U.S. dollar.U.S. light crude for July delivery rose 40 cents to $132.59 a barrel by 0017 GMT. It settled up $1.38 at $132.19 a barrel on Friday after striking a record high of $135.09 in intraday trade last week.

London Brent crude rose 30 cents to $131.87."The market is continuing to focus on supply side concerns and the outage at Statfjord fields is an issue," said Gerard Burg, a commodities analyst at the National Australian Bank.Analysts said continued weakness in the U.S. dollar was also supporting oil’s rise.An oil spill at Statfjord shut about 138,000 barrels per day of production on Saturday and triggered the evacuation of workers, operator StatoilHydro said.StatoilHydro said on Sunday the oil spill had been cleaned up, all workers had returned to the platform and preparations were under way to restart production.

Worries that supply would struggle to keep up with demand over the next few years also supported prices.

OPEC Secretary-General Abdullah al-Badri said on Friday he was not worried about reports of faster-than-expected depletion in the world’s biggest oil fields and repeated his position that runaway oil prices were caused by speculation and not by supply problems. A Reuters survey last week showed that non-OPEC production had stagnated and would remain below 50 million barrels per day this year. Oil prices have climbed by around a third since the start of the year as investors seeking a hedge against inflation and the falling U.S. dollar pile into commodities.

Analysts said concern that record oil prices could dent global demand was the key downside risk.

European Central Bank President Jean-Claude Trichet said the potential economic fallout from financial market turmoil, along with rising food and commodity prices, could shock the economy further, while Vice President Lucas Papademos said inflation pressures had intensified due to rising oil prices, which were also dampening growth. In the U.S., data released on Friday showed that highway miles driven in March fell 4.3 percent from a year earlier, the first time this has happened in March since the last major oil shock in 1979.Road travel during the Memorial Day holiday over the weekend was expected to be 1 percent lower than last year, the first such decline since 2002.Crude oil speculators on the New York Mercantile Exchange trimmed net long positions last week, according to data from the Commodity Futures Trading Commission released on Friday.

Net long positions fell to 50,060 in the week to May 20 from 71,767 the previous week.