--Crude sinks as dollar climbs --Saudi Arabia to ensure oil prices are fair for all --SPR release could offset short-lived disruption (Updates prices in second and third paragraphs, adds more details and background on Saudi Arabia.) By Dan Strumpf Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Oil futures traded lower Tuesday, pressured by a stronger dollar and indications that Saudi Arabia will work to cool rising oil prices. Light, sweet crude for April delivery fell $1.83, or 1.7%, to $106.26 a barrel on the New York Mercantile Exchange. With the contract set to expire at the close of trading Tuesday, the more heavily traded May contract recently fell $ 1.89, or 1.8%, to $106.67 a barrel. Brent crude on ICE Futures Europe traded $2.34, or 1.9%, to $123.37 a barrel. Futures took cues from the strengthening dollar, which booked gains against most other currencies on concerns about a slowdown in Chinese economic growth. A firmer greenback typically pressures oil prices by making the dollar-denominated commodity more expensive for holders of other currencies. "The big picture is still looking at the Chinese economy slowing down a little bit, and that could be the biggest negative headline out there," said Carl Larry, president of Oil Outlooks and Opinions in New York. The ICE Dollar Index, which tracks the dollar against a basket of foreign currencies, recently rose 0.3% to 79.730. Separately, Saudi Arabia, the world's biggest oil exporter, late Monday said it would work with other oil producers to "restore oil prices to levels that are fair for producers, consumers and the oil industry," according to a statement from the Saudi cabinet posted by the country's official news agency. Traders closely follow comments from Saudi Arabia on oil prices. The country has the most spare capacity among members of the Organization of Petroleum Exporting Countries and its output often influences prices. According to a Dow Jones survey published earlier this month, the kingdom produced 9.8 million barrels a day in February, up from 9.625 million barrels a day in January. The issue of supply availability has come into sharper focus in the oil market over the last year, as geopolitical concerns have roiled many of the world's biggest producers, threatening production. In recent months, producers have turned their attention to Iran, which has been the subject of increasingly tough sanctions over its nuclear program. A European oil embargo on Iran is set to take full effect July 1, but worries about a military conflict or a closure of the Strait of Hormuz has put oil markets on high alert. Morgan Stanley analysts said the oil market may need to replace anywhere between 800,000 to 2 million barrels a day of Iranian exports this summer, " while a worst-case scenario may involve a closure of the Strait of Hormuz." The analysts pointed out, however, that a release of strategic oil stocks by developed countries would be enough to offset a "short-lived" supply disruption. Front-month April reformulated gasoline blendstock, or RBOB, recently traded 4.30 cents, or 1.3%, lower at $3.3248 a gallon. April heating oil fell 4.79 cents, or 1.5%, to $3.2134 a gallon.

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