Last week, open outcry trading on the New York Mercantile Exchange saw crude oil close at $145.29 per barrel. A short while later in electronic trading, crude oil rose to as high as $145.85 per barrel. On Friday, following news that Iran had replied to the latest international incentives package concerning its nuclear program, oil faded, dropping to $144.13 per barrel by the time electronic trading ended.

Since then, several developments have occurred that might give a boost to the price of crude oil:

• Iran's reply offered no substantive changes from its, to date, unyielding position on its uranium enrichment activities. As a result, the geopolitical risk associated with Iran's nuclear program has not diminished.

• OPEC President Chakib Khelil discounted prospects of a decline in crude oil prices. He highlighted growing demand for crude oil in China and India as limiting prospects for dampening the price of crude oil. As Mr. Khelil speaks for OPEC, his remarks could be interpreted as indicating that OPEC is unwilling or unable to try to reduce prices through appreciable increases in production.

• President Bush made comments concerning a "strong dollar." However, as in repeated instances with earlier such statements from both President Bush and Treasury Secretary Paulson, the rhetoric was not backed by any substantive policy commitments e.g., an announcement of an effort towards fiscal restraint, etc. As a result, given past repetition of such statements during the dollar's depreciation, the remarks are not likely to be viewed as credible. Consequently, the underlying dynamics concerning the U.S. dollar will remain essentially unchanged on account of those remarks.

• Economists expect that the U.S. trade deficit widened in June. The trade figures will be released on Friday. The consensus forecast is for a $62.4 billion trade deficit vs. the $60.9 billion deficit in May. Larger trade deficits, because they increase the amount of dollars overseas, tend to have a negative impact on the exchange rate for dollars. The value of crude oil imports may have reached 50% of the U.S. trade deficit. Import prices are also likely to increased, but given diminishing expectations for the Fed to increase interest rates in the near-term, that data likely won't have much impact on the value of the U.S. dollar.

• News that the UAE has called for the 6-nation Gulf Cooperation Council to consider depegging to the U.S. dollar could somewhat heighten the negative environment for the U.S. dollar.

• News that South Korea plans to implement a multi-stage plan aimed at reducing public sector consumption of oil by 6.6% offers one factor that may cut somewhat against a rising oil price. Overall, the plan would reduce that country's consumption by an estimated 4%.

All said, it is possible that the early hours of electronic trading could witness an increase in the price of crude oil. Of course, later developments will influence trading.

Overnight, as economic data came in showing increasing weakness in Europe, including a 0.5% contraction in British factory output for May, the U.S. dollar rose. In turn, the price of crude oil retreated. Just before 8:00 am EDT, oil was trading at $142.61 in electronic trading.

This latest confirmation of a dollar-oil link further contradicted Treasury Sectretary Paulson's notion that the decline in the U.S. dollar has had very little influence on the price of crude oil (http://www.debatepolitics.com/econom...rice-rise.html (Treasury Secretary Paulson: Don't Blame Dollar Weakness for Oil Price Rise)).