UPDATE 5-Oil sets new record near $120

                                
 (Updates prices)
                                
 By Jane Merriman
                                
 LONDON, April 28 (Reuters) - Oil hit a new record near $120
a barrel on Monday, boosted by a string of bullish factors that
include a UK refinery strike and disruptions to Nigeria's output
that highlight the market's anxieties over threats to supply.
                                
 Prices held firm below earlier highs, despite a rally in the
U.S. dollar versus the euro and yen, which reflected growing
expectations that the U.S. Federal Reserve may not cut interest
rates this week. [FRX/]
                                
 U.S. light crude for June delivery <CLc1> was up 28 cents at
$118.80 a barrel by 1055 GMT, after a lifetime high of $119.93.
Prices are up almost 25 percent since the start of the year.
                                
 London Brent crude <LCOc1> was up 6 cents to $116.40.
                                
 "The Federal Reserve will have a chance to bolster the
dollar if it decides to hold the line on further rate
increases," Edward Meir, analyst with broker MF Global, said in
a research note. "Both these developments could possibly induce
a correction in energy prices later in the week, but for now the
trend appears higher still."
                                
 Crude prices have surged more than fivefold since 2002 as
global supplies struggle to keep pace with rising demand in
emerging economies, such as China.
                                
 The Organization of the Petroleum Exporting Countries
(OPEC), that produces more than a third of the world's oil, has
refused to pump more, saying the market is adequately supplied.
                                
 OPEC President Chakib Khelil blamed the fall in the U.S.
dollar for high prices and did not rule out prices rising to
$200 a barrel.
                                
 "Without geopolitical problems and the fall in the dollar,
the prices of oil would not be at this level," he was quoted
saying in Algerian government newspaper El Moudhajid.
[nL28112626]
                                
 A fall in the U.S. dollar has played a big part in oil's
surge, boosting the value of commodities priced in the U.S.
currency.
                                
 Gold, for example, hit a record high of more than $1,000 an
ounce on March 17. But gold is now more than 13 percent below
its peak as investors wait to see the direction of U.S. interest
rates. [nSP109647]
                                
 Investors are now focused on the Federal Reserve's interest
rate setting meeting, which starts on Tuesday.
                                
 Financial markets had expected a cut in interest rates to
help revive the flagging U.S. economy, but now some investors
believe the Fed could signal its rate cutting is over.
                                
 
                                
 SUPPLY DISRUPTIONS
                                
 The 700,000-barrel-per-day (bpd) Forties North Sea crude oil
pipeline remained closed on Monday due to a strike at the
neighbouring 210,000 bpd Grangemouth refinery after the collapse
of talks over pensions. [nL2653513]
                                
 Ineos, the owner of the Grangemouth refinery, expects
striking employees to return to work on Tuesday. BP has said the
Forties pipeline could then be back in operation within 24 hours
but might take a few more days to get back to full flow.
                                
 In Nigeria, unidentified gunmen killed five policemen and
seized several weapons in a raid on a police station in the
oil-rich southern Nigerian state of Rivers on Sunday.
[nL27385908].
                                
 Last week a strike and attacks by rebels forced Nigeria's
two largest oil firms, Exxon Mobil <XOM.N> and Royal Dutch Shell
<RDSa.L>, to shut some 369,000 bpd of production.
 (Additional reporting by Fayen Wong in Perth; editing by James
Jukwey)