(Adds detail on forward prices, updates prices)
By Jane Merriman
LONDON, April 22 (Reuters) - Oil rose to a record high above
$118 on Tuesday, boosted by a jump in oil demand last month from
China, the world's second biggest energy consumer, and worries
about supply from key producers Russia and Nigeria.
U.S. light crude for May delivery <CLc1> was up 25 cents at
$117.73 a barrel by 1108 GMT, easing from an all-time peak of
$118.05 hit earlier in the day.
London Brent crude <LCOc1> was up 40 cents at $114.83 a
barrel, after rising to a record peak of $115.03.
Oil has hit a string of record highs this month, driven by
booming demand from emerging markets such as China that has
coincided with long-term supply constraints.
A weak U.S. dollar has also played a part in boosting the
price of dollar-denominated commodities like oil and also
attracted speculative inflows from hedge funds.
"Every time the market does make new highs, it suggests that
the upward trend is still intact and that provides a catalyst
for the funds to keep buying it," said Tony Machacek of Bache
Commodities Ltd.
China's oil demand leapt 8 percent in March from a year ago,
the fastest rate in 19 months as refiners boosted imports ahead
of the Olympics. [].
But the high cost of producing more oil plus political
constraints on new supplies mean the market looks set to
struggle to keep pace with growing emerging market demand.
"The news that Russia, the largest non-OPEC producer, will
produce less this year than the year before and Nigeria's output
may be set to fall because of lack of investment makes people
realise high prices are justified," said Bob Greer, executive
vice president at commodity fund manager PIMCO.
"The 5 year forward contract has gone above $100," he said,
referring to a surge in long-dated oil prices. <0#C.:>
From 2010 to 2016, for example, oil prices currently range
from around $106 to nearly $108 a barrel.
The long-term drivers for investment in the oil market
include tight spare capacity, slow output growth from non-OPEC
producers and robust demand from emerging economies. This is
more than compensating for declining demand from industrial
countries.
SUPPLY DISRUPTIONS
Against this backdrop, the market is sensitive to any events
that could threaten supply.
Pipeline attacks in OPEC member Nigeria last week shut
169,000 barrels per day (bpd) of Bonny Light production, forcing
Royal Dutch Shell Plc <RDSa.L> to declare force majeure on crude
oil exports. []
Nigerian rebels also attacked two Shell oil pipelines in the
Niger Delta on Monday. []
An oil refinery at Grangemouth in Scotland has begun
shutting down ahead of a two-day strike due to start on Sunday.
Some North Sea oil and natural gas output will have to be shut
in if the strike halts the refinery.
The Organization of the Petroleum Exporting Countries has
insisted the market has enough oil and refused to pump more
crude despite calls for more oil from consumer nations.
A lack of spare global output capacity means very little can
be done to tame record high oil prices, Shokri Ghanem, head of
Libya's National Oil Corporation said. []
"Prices will have to stay high in the long term to encourage
exploration and production," he said, speaking on the sidelines
of the International Energy Forum in Rome.
(Reporting by Felicia Loo in Singapore, Editing by Margaret
Orgill)
