Oil flat on mortgage rescue, low supply
Plan to aid mortgage finance companies counters new supply concerns from Brazil to keep prices near the break-even point.
NEW YORK (CNNMoney.com) -- Oil prices were virtually unchanged Monday as a plan to aid the major U.S. mortgage finance firms was countered by continuing concerns about supply, particularly after Brazilian oil workers began a 5-day strike.
Light, sweet crude for August delivery rose 10 cents to settle at $145.18 a barrel on the New York Mercantile Exchange trading.
The volatility that has dominated the market in recent weeks continued Monday, with crude prices ranging between $142.49 and $146.37 a barrel. The record trading high of $147.27 was set Friday.
Prices fell overnight after the Treasury Department and the Federal Reserve announced a plan to shore up ailing mortgage finance firms Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). The mortgage rescue announcement helped push up the value of the dollar, making oil less attractive as a hedge against inflation.
But prices got a boost when workers at Petrobras, Brazil's state-run oil company, began a five-day strike Monday at several offshore sites in the Campos basin. The region accounts for about 85% of the country's oil production.
Supply concerns have been key to the recent record oil run, with the market particularly worried about oil production from OPEC members Iran and Nigeria.
Watching stocks. Investors watched stocks - particularly shares of Fannie Mae and Freddie Mac - to assess the impact of the government's bolstering effort on the mortgage market and the greater economy.
"If the stock market rebounds, I think the [oil] market will go back down," said Phil Flynn, a senior market analyst at Alaron Trading in Chicago.
"The Fed is in a tight situation," said Tom Orr, head of research at Weeden & Co., who expressed fears that the U.S. central bank may be unable to control the runaway inflation and credit market problems that have plagued the economy over the past several months.
Gas prices. Meanwhile, the prices of both gasoline and diesel fuel at the pump rose to record levels Monday, according to the motorist group AAA. The average price of unleaded gasoline hit $4.109 a gallon at the pump, while diesel rose to $4.824 a gallon.
President Bush announced Monday he is lifting an executive ban on offshore oil drilling, the White House said. The move is largely symbolic because there is also a federal law banning offshore oil drilling.
Bush has been pushing Congress to repeal the law, passed in 1981. Key Democrats in Congress - many of whom oppose any extension of offshore drilling - have instead urged the president to tap some of the Strategic Petroleum Reserve in an effort to drive down prices. 
