(Updates prices)
By Jane Merriman
LONDON, May 6 (Reuters) - Oil stood firm on Tuesday after
setting a new record high of nearly $121 a barrel, the latest
spurt in an advance that has seen prices double over the past 12
months.
Supply disruptions in Nigeria, where a strike and attacks by
militants has hit production, has supported a market that is
nervous about any threats to supply. [].
Tensions with Iran racheted higher when the world's
fourth-biggest oil producer refused to accept intrusive
inspections of its nuclear programme that the West fears could
be linked to weapons. []
U.S. light crude for June delivery <CLc1> was up 7 cents at
$120.04 a barrel, by 1155 GMT after earlier touching a record
high of $120.93.
London Brent crude <LCOc1> was up 33 cents at $118.32 a
barrel, after an earlier record of $119.07.
Gold was also strong, as oil's advance helped spur a rebound
from a four-month low last week. But gold <XAU=> is still some
way below a record of $1,030.80 an ounce reached on March 17.
"The downward move in oil last week now seems like only a
correction," said Christopher Bellew, senior vice president at
Bache Commodities.
"The effect of the credit crisis in the United States is
reducing people's disposable incomes and you'd expect this to
have an impact on the oil price, but it's not having any
impact."
Demand from emerging markets such as India and China is more
than compensating for the U.S. downturn, he said.
Goldman Sachs predicted oil could soar towards $150-$200 a
barrel because of a lack of adequate supply growth.
"The possibility of $150-$200 per barrel seems increasingly
likely over the next 6-24 months, though predicting the ultimate
peak in oil prices as well as the remaining duration of the
upcycle remains a major uncertainty," the bank said.
The U.S. investment bank had predicted back in 2005 that oil
was entering a "super-spike" period.
Oil prices further into the future have also risen sharply,
with prices out to 2016 above $110 a barrel. [].
VULNERABLE
Oil has nearly doubled in the past year and is up by a
quarter since the start of 2008 partly due to the problems in
Nigeria, plus weakness in the U.S. dollar, which has boosted the
price of commodities denominated in the U.S. currency.
Last week, oil retreated almost $10 a barrel, partly due to
a reduction in speculative positions and as strikes affecting
Nigeria and the North Sea came to an end.
Exxon Mobil <XOM.N> said on Tuesday it had returned oil
output in Nigeria to normal levels after an eight-day strike,
but Shell <RDSa.L> said its production there was still down by
about 164,000 barrels a day due to recent militant attacks.
"A lot of this is supply-driven, with the market very
vulnerable to any disruption in supplies," said Mark Pervan, a
senior commodities analyst at the Australian & New Zealand Bank.
"We're seeing large oil-producing countries coming up as a
question mark," he said.
U.S. President George W. Bush is expected to talk with
officials from Saudi Arabia about the effects of high fuel
prices on the U.S. economy on his trip to the world's top
exporter later this month. []
Bush has called on the Organization of the Petroleum
Exporting Countries to raise output to help bring down prices.
The U.S. dollar, whose decline in the past months has been
driving speculative investments in dollar-denominated crude and
other commodities, was weaker versus the euro on Tuesday on
continued doubts about the health of the U.S. economy despite
upside surprises from recent economic indicators.
Later in the week on Wednesday, traders will watch the
weekly U.S. government report on fuel inventories, which is
expected to show a 1.8 million-barrel build in crude stocks, a
1.1 million-barrel rise in distillate inventories and a
100,000-barrel fall in gasoline stocks. []
(Additional reporting by Baizhen Chua in Singapore; editing by
James Jukwey)
