LONDON -- Oil stood firm on Tuesday after setting a new record high of nearly $121 per barrel, the latest spurt in an advance that has seen prices double over the past 12 months, reported Reuters.
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 ratcheted higher when the world's fourth-biggest oil producer refused to accept intrusive inspections of its nuclear program that the West fears could be linked to weapons.
U.S. light crude for June delivery was [image-nocss] up 7 cents at $120.04 a barrel, by 7:55 a.m. EDT after earlier touching a record high of $120.93. London Brent crude was up 33 cents at $118.32 a barrel, after an earlier record of $119.07.
"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 six to 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.
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 said on Tuesday it had returned oil output in Nigeria to normal levels after an eight-day strike, but Shell 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.
President 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 (OPEC) to raise output to help bring down prices.
Traders will watch today's federal Energy Information Administration (EIA) weekly 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.
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