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Oil nears $120 PDF Print E-mail
Tuesday, 29 April 2008

AP, VIENNA, Austria -- Oil prices hit an all-time high near $120 a barrel Monday after a weekend refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K.

The shutdown comes amid supply outages in Nigeria that have helped to support oil against a strengthening dollar. ''We've got a confluence of a number of events that have really disrupted crude oil supply,'' said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

''That's what's driving oil to a new record even though the U.S. dollar actually strengthened a bit.'' Light, sweet crude for June delivery rose to a record $119.93 a barrel in electronic trading on the New York Mercantile Exchange.

The contract eased back to $119.04 a barrel by afternoon in Europe, up 52 cents from Friday's close of $118.52. BP PLC on Sunday shut down the Forties Pipeline System that carries more than 700,000 barrels of oil a day to the U.K. because of a 48-hour walkout by employees at a refinery in central Scotland. Analyst Stephen Schork also attributed the bullish market to the combination of events stoking supply concerns.

''News that BP shut-in 40 percent of the Forties Pipe compounded the latest headline out of Nigeria regarding a rebel attack near that country's largest oil and gas export terminal on Bonny Island,'' he said in his Schork Report. ''Thus, all of that 'bubble talk' aside, the market looks stronger than ever.''

Demand is high for Nigeria's light, sweet crude, which is easily refined. After years of militant attacks, however, Nigeria's output is dropping and the country can produce only about 75 percent of its official production capacity of 2.5 million barrels per day.

This week, the oil market is also expected to closely watch the outcome of the U.S. Federal Reserve's policy meeting on Tuesday and Wednesday. Many analysts believe the weakness of the dollar is a bigger factor than supply and demand because the soft dollar draws investors worried about inflation into commodities such as oil.

It also makes commodities less expensive for buyers operating in other currencies. In other Nymex trading, heating oil futures were flat at $3.310 a gallon while gasoline prices moved up slightly to fetch $3.0568 a gallon.

Natural gas futures added over 10 cents to sell at $11.072 per 1,000 cubic feet. Brent crude futures rose 65 cents to $116.99 a barrel on the ICE Futures exchange in London.

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