(Adds Saudi oil minister, updates prices)
By Jane Merriman
LONDON, April 22 (Reuters) - Oil struck a record high of
more than $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 down 10 cents
down at $117.38 a barrel by 1400 GMT, easing from an all-time
peak of $118.05 hit earlier in the day.
London Brent crude <LCOc1> was up 5 cents at $114.48 a
barrel, after rising to a record peak of $115.05.
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.
INVESTMENT
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.
"Limited capacity along the entire supply chain is the real
source of current global supply tightness," Saudi Arabia's Oil
Minister Ali al-Naimi said on Tuesday.
Shortages of labour, equipment and materials were raising
costs and delaying new projects that would boost capacity, he
said in a speech to the International Energy Forum in Rome.
[]
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 shunned calls from
consumer nations to pump more crude.
(Additional reporting by Felicia Loo in Singapore; editing by
James Jukwey)
