June 15 (Bloomberg) -- Oil fell for a second day as the dollar rose the most against the euro since April, limiting investors’ need to use commodities as an inflation hedge.

Crude declined as the U.S. currency rose to its strongest against the euro since May 21 after Russian Finance Minister Alexei Kudrin said the nation has full confidence in the dollar. Oil also weakened as a report showed manufacturing in the New York region contracted for a 14th month and equities retreated in the U.S., Europe and Asia.

“Crude is falling in response to the equities and the strengthening of the dollar,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant. “As long as the dollar stays strong, it will pressure oil, and weakness in equities accentuates that selling.”

Crude oil for July delivery lost $1.42, or 2 percent, to settle at $70.62 a barrel at 2:42 p.m. on the New York Mercantile Exchange. It fell as much as 3.4 percent to $69.58, the lowest since June 9. Oil reached $73.23 on June 11, the highest in seven months.

The U.S. Dollar Index, which tracks the currency against six others, rose 1.3 percent to 81.178 at 3:33 p.m. in New York, the highest since June 9. The dollar index trades on ICE Futures in New York. It rose 1.6 percent against the euro to $1.3786 at 3:45 p.m. in New York from $1.4024 June 12.

The Russian finance minister’s remarks came before a summit in Russia tomorrow by the so-called BRIC countries: Brazil, China, Russia and India.

Rising Brics

The BRICs may overtake the combined $30.2 trillion gross domestic product of the Group of Seven nations by 2027, Jim O’Neill, the London-based Goldman Sachs Group Inc. chief economist who coined the term for the four countries in a 2001 report, has said.

“When the dollar gets stronger, some of the attraction for commodities tends to wane a bit,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The waves of profit taking don’t tend to last too long before the market recovers.”

U.S. stocks extended a global slide, dragging the Standard & Poor’s 500 Index down from a seven-month high. The S&P 500, which had climbed 40 percent from a 12-year low March 9, decreased 2.4 percent to 923.72 at 4:08 p.m. New York time. The Dow Jones Industrial Average tumbled 187.13, or 2. percent, to 8,612.13.

Europe’s Dow Jones Stoxx 600 Index slumped 2.5 percent, and Japan’s Nikkei 225 Stock Average fell 1 percent. Hong Kong’s Hang Seng Index declined 2.1 percent.

Iranian Election

“If oil was trading based on its own fundamentals, we’d be up a dollar today over the Iranian conflict over the weekend,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “Watch the stock market. If it were to come back at all, oil would come back as well because it has this Iranian conflict on the back burner.”

He cited concern that post-election unrest in Iran might threaten Mideast stability and oil supplies.

Thousands of protesters defied an Iranian government ban on a rally in Tehran to protest President Mahmoud Ahmadinejad’s re- election, as the country’s supreme leader said allegations of vote-rigging should be investigated. Former premier Mir Hossein Mousavi, Ahmadinejad’s main challenger in the June 12 ballot, attended the gathering to urge the crowd to stay “calm.”

Moving Averages

Oil’s average closing price over 50 days is set to rise above its 200-day mean, a signal that the price rally is maintaining momentum, according to consultants Petromatrix GmbH. The price of New York-traded oil averaged over the last 200 days was last at $59.16 a barrel, compared with $57.95 over 50 days.

“It’s not a classic leading indicator, but it’s one more thing adding to the momentum,” Petromatrix Managing Director Olivier Jakob said in an interview today from Zug, Switzerland. Crude “remains in an ascending channel,” he said.

Brent crude for July delivery fell $1.48, or 2.1 percent to expire at $69.44 a barrel on London’s ICE Futures Europe exchange. The more actively traded August contract lost $1.56, or 2.2 percent, to $70.24 a barrel.

Rebels in Nigeria, Africa’s biggest oil producer and the sixth-largest in the Organization of Petroleum Exporting Countries, blew up two oil wells and pipelines at the Chevron Corp.-operated Makaraba field in the Niger delta area, the Movement for the Emancipation of the Niger Delta said yesterday.

Gasoline Rises

Gasoline for July delivery rose 0.99 cent, or 0.5 percent to settle at $2.0530 a gallon on the Nymex. Prices have more than doubled this year, as crude oil has increased.

“The cost of gasoline has gone up because the cost of crude oil has gone up,” said John Felmy, chief economist with the Washington-based American Petroleum Institute, in a conference call today with reporters.

Worldwide oil supply and demand are “probably at equilibrium,” in part from effective OPEC cuts, he said.

U.S. crude oil inventories probably fell in the week ended June 12, as refiners ramped up production and boosted stockpiles of gasoline and heating oil, a Bloomberg News survey showed.

Crude-oil supplies probably fell 2 million barrels last week from 361.6 million barrels the previous week, according to the median of five estimates by analysts before an Energy Department report this week. All five forecast a drop.

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended June 9, according to U.S. Commodity Futures Trading Commission data.

Speculative Positions

Speculative long positions, or bets prices will rise, outnumbered short positions by 47,883 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report on June 12. Net-long positions rose 8,196 contracts, or 21 percent, from a week earlier.

“Speculative money has increased oil’s sensitivity to dollar movements, and if the dollar continues to strengthen, this will weigh on prices,” said Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich. “Unless we see a significant improvement in the fundamentals, we continue to expect a correction from current levels.”

Crude oil volume in electronic trading on the Nymex was 380,039 contracts as of 3:50 p.m. in New York. Volume totaled 441,036 contracts June 12, 12 percent lower than the average over the past three months. Open interest was 1.21 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

Last Updated: June 15, 2009 17:03 EDT