Oil price continues record run at $122

05/08/2008

London — World oil prices neared record levels close to P122 per barrel yesterday as traders awaited a crucial weekly update on American energy reserves amid concern about tight global supplies.

New York’s main oil futures contract, light sweet crude for June delivery, eased 10 cents to $121.74, after hitting a lifetime peak of $122.73 on Tuesday.

The price of London’s Brent North Sea crude for June delivery gained 7 cents to $120.38.

The contract had struck a historic pinnacle of $120.99 on Tuesday.

Runaway oil prices have almost doubled in the past year and have surged by more than $20 since the beginning of 2008.

The market was also boosted this week after Goldman Sachs forecast that prices could strike $200 per barrel within the next two years. The US investment bank had famously and correctly predicted three years ago that oil would break through $100 — which it did in January.

“Crude oil prices were trading (on Wednesday) around $122, with the weekly EIA data out later today keeping the market on edge,” said Sucden analyst Michael Davies.

The US government’s Energy Information Administration was due later Wednesday to reveal the state of American energy inventories for the week ending May 2.

Ongoing violence in Nigeria — Africa’s largest crude producer — had helped push oil prices to record peaks on Tuesday, traders said.

“Support stemmed from continued unrest in Nigeria where a string of attacks by rebels calling for a greater share of the country’s oil wealth has shut-in a sizeable element of its production,” said analysts at energy consultancy John Hall Associates.

“Concerns over further Turkish incursion into Iraq in pursuit of Kurdish separatists also underpinned price movements.”

Nigerian militants attacked an oil ship off the coast of the west African country and took two persons hostage over the weekend, a military spokesman said Sunday.

The incident on Saturday came after an attack on Shell oil wells and a flow station in southern Bayelsa state, leading to a cut in the company’s output.

Such attacks have cut Nigeria’s production by about a quarter over the past two years.

David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney, said sentiment remained buoyant after Tuesday’s sharp gains.

“While issues on the supply side are being progressively resolved... they highlight the risks of oil production going forward,” said Moore.

He added “Iran may also add a little risk element” in the near term.

Iran said Monday it would reject any offer that violates its right to the full nuclear fuel cycle after world powers said they had prepared a new package to end a long-running standoff over its nuclear program.

Oil players fear the ongoing tension could result in Iran using oil as a bargaining chip. Iran is the second-largest producer in the Organisation of the Petroleum Exporting Countries cartel. AFP

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