Iran blames weakening dollar for 30% increase in oil prices

Colombo: The falling value of the dollar is to blame for around a third of the rise in the price of oil, Iran's Foreign Minister Manouchehr Mottaki said.

"Thirty per cent of the increase [in the price] of oil is because of the decrease in the value of the dollar," he said on the sidelines of the South Asia Association for Regional Cooperation (Saarc) summit in the Sri Lankan capital Colombo.

He did not say what time period he was referring to. The dollar has dropped 33.8 per cent against a basket of six currencies since US President George W. Bush took office on January 20, 2001, according to the New York Board of Trade's dollar index.

Oil has seen a heavy selloff since hitting a record high above $147 on July 11, but US crude futures ended higher on Friday on concerns about Nigerian supply snags and the West's dispute with Tehran over Iran's nuclear programme.

The West suspects Iran is pursuing nuclear technology in order to build weapons, a charge Iran denies. On Saturday its President Mahmoud Ahmadinejad said the country would not retreat "one iota" from its nuclear rights.

His comments were an apparent rebuff to Western powers who had set Saturday as an informal deadline for Iran to respond to their offer to hold off from imposing more UN sanctions on Iran if it froze any expansion of its nuclear work. Mottaki also said unspecified behind-the-scenes actions had played a role in the oil price increase, and that Iran supported "the stability of the oil price in the market".

Exports halted

Meanwhile, Iran has temporarily halted exports of fuel oil because of domestic needs during a severe drought, a senior official was quoted as saying on Saturday.

Iran is a regular exporter of fuel oil to Asia. But industry sources said on Thursday it will halt exports of the heavy fuel from August as it builds domestic stockpiles ahead of winter, and due to a heavy maintenance schedule in the fourth-quarter.

However, Ali-Asghar Arshid, international affairs director at the National Iranian Oil Company, said the export halt was due to a drought which has hit hydro-generated power and forced Iran to introduce daily power outages.

"Because of the current drought and the needs for fuel of power stations, the export of heavy fuel has been temporarily stopped," Arshid was quoted as saying by the semi-official Fars news agency.

Iran's decision came on the heels of Saudi Arabia's move to stop exporting spot fuel oil after its peak summer demand season, due to rising domestic requirements from domestic power plants and new secondary refining units.

The moves by the two biggest fuel oil exporters in the Middle East will worsen the current tight supply in Asia.