World oil prices strike record peaks above $119

April 22, 2008
NEW YORK (AFP) - World oil prices jumped to record peaks above 119 dollars on Tuesday in response to the weak US dollar, unrest in Nigeria and OPEC's reluctance to hike output, traders said.

Global supply jitters have seen oil contracts traded in New York spike by more than 57 dollars in the past year, sparking concerns that sky-high prices could harm US economic growth which has already slowed sharply.

New York's main oil futures contract, light sweet crude for delivery in May, closed at a record 119.37 dollars a barrel, up a hefty 1.89 dollars compared with Monday's closing level.

Buyers and speculators had pushed the contract's price to an all-time intraday peak of 119.90 dollars in earlier trading.

Prices also hit new highs in London. Brent North Sea crude for June delivery hit a record 116.75 dollars a barrel in intra day activity before settling at an all-time high of 115.95, marking a 1.52 dollar gain from Monday.

"For the moment, there does not seem to be anything stopping the price juggernaut we are seeing in energy," said MF Global analyst Ed Meir.

Analysts say rapid economic growth in China and India is also fueling increased demand for oil and further contributing to the global price spike.

A weakening US dollar has also spurred oil demand. International oil prices are quoted in dollars, so crude becomes cheaper for purchasers holding foreign currencies that have jumped in value against the ailing dollar.

Oil prices accelerated as the euro briefly hit a record 1.60 dollars amid downbeat US economic news, including another dour report on the troubled housing market.

"The (oil) market is still fairly tight, with OPEC reluctant to hike output, blaming speculators and the broad weakness in the dollar for driving prices higher," said Sucden analyst Andrey Kryuchenkov.

Global supply worries were stoked after Anglo-Dutch oil group Royal Dutch Shell reported an output loss of 169,000 barrels per day (bpd) due to acts of sabotage against its key pipelines in southern Nigeria.

"Generally, we have a shut-in of 169,000 bpd as a result of the recent attacks on our pipelines," Shell spokesman Precious Okolobo told AFP.

He said the production loss followed a weekend attack on a pipeline feeding the Bonny exports terminal and damage wrought on Monday against the Soku-Buguma and Buguma-Alakiri pipelines.

Okolobo said efforts were being made to "assess the extent of damage to the pipelines with a view to fixing them."

Shell said on Monday that it might not be able to honour oil contracts for April and May after the attacks.

Bonny along with the terminal at Forcados east are Shell's most important installations in Nigeria which is Africa's biggest oil producing nation.

The Movement for the Emancipation of the Niger Delta (MEND) militant group, which is active in the west African country's oil-rich south, claimed responsibility for the attack on the Bonny terminal.

Violence in the southern Delta region has cut Nigeria's total production by a quarter since January 2006.

The price rises also came despite news that the Organization of the Petroleum Exporting Countries (OPEC) plans to increase its production capacity by five million bpd by 2012, the cartel's secretary general Abdalla Salem El-Badri said Tuesday.

El-Badri said OPEC aimed to boost production capacity by nine million bpd by 2020. The current output of the oil producer's cartel stands at about 32 million bpd.

The 13-nation group, which produces 40 percent of the world's oil, insists there is no global shortage of oil, and has blamed record prices on market speculators.