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Oil sets new record above $118 a barrel on supply concerns

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[April 22, 2008]  (AP)  Oil prices rose Tuesday to a all-time highs above $118 a barrel on concerns over supplies from some key producers.

Light, sweet crude for May delivery rose as high as $118.05 a barrel in electronic trading on the New York Mercantile Exchange, eclipsing Monday's all-time high of $117.83.

By midday in Europe, the contract had risen to $117.77, up 29 cents on Monday's close of $117.48 a barrel. The May contract expires at the end of trading Tuesday.

In London, Brent crude futures added 28 cents to $114.71 a barrel on the ICE Futures exchange.

A Royal Dutch Shell PLC joint venture in Nigeria said Monday it may have to cut crude deliveries some 169,000 barrels a day in April and May because militants sabotaged a pipeline last week in the country's south.

The company, Shell Petroleum Development Co., declared force majeure on its April and May oil delivery contracts from its 400,000-barrel-a-day Bonny fields, effective April 22, a move that protects it from litigation if it fails to deliver on contractual obligations to buyers.

Militancy and lawlessness have spread in Nigeria's south, and attacks on oil infrastructure have become common.

"The disruption in Nigeria with Royal Dutch Shell is serious," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"It is light, sweet crude, which is much desired by the U.S. market during the summer gasoline season, so that certainly has affected the market," Shum said.

Nigeria is a major supplier to the United States. Attacks there in the past two years have cut nearly a quarter of the African country's oil output. Crude oil set a record above $117 Monday after the 150,000-ton tanker Takayama was attacked off the coast of Yemen as it headed for Saudi Arabia.

Kyodo News agency said there were no injuries, but the the rocket punctured a tank, spilling hundreds of gallons of fuel.

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Analysts said comments Tuesday by the head of the Organization of Petroleum Exporting Countries about plans to boost oil production target capacity by 5 million barrels a day by 2012 would not have an immediate effect on oil prices.

Speaking at an energy forum in Rome, OPEC Secretary-General Abdalla Salem el-Badri told reporters that issues of supply and demand were being discussed but he did not expect any agreement on whether prices are too high or too low.

"This is not anything new and it will not help ease oil prices," said Ehsan ul-Haq, head of research at JBC Energy in Vienna, Austria. "The oil futures market is very strong, but the physical markets are not so strong."

Other supply developments also factored into the market. In Mexico, oil production slipped 7.8 percent in the first quarter to 2.91 million barrels a day as output at the country's traditional oil fields wanes, state oil company Petroleos Mexicanos said. In Scotland, workers at Ineos PLC's 196,000 barrel-a-day Grangemouth refinery and petrochemical plant have threatened to strike for 48 hours from April 27 over changes to an employee pension plan.

The weak U.S. dollar has continued to support oil prices despite strengthening some this week against the yen and euro. Commodities such as oil and gold are still attractive hedges to investors seeking hedges against further drops in the currency.

In other Nymex trading, heating oil futures fell 0.04 cent to $3.3110 a gallon while gasoline futures lost 0.29 cent to $2.9762 a gallon. Natural gas futures were unchanged at $10.733 per 1,000 cubic feet.

[Associated Press; By PABLO GORONDI]

Associated Press writer Gillian Wong in Singapore contributed to this report.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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