Oil sets new record high of $122 a barrel

6 May, 2008, 2029 hrs IST, AGENCIES

LONDON: Oil prices hit a record high $122 here on Tuesday as the market was driven by concerns over violence in key producer Nigeria and a struggling US currency, analysts said.

After spiking to a fresh high, New York's main oil futures contract, light sweet crude for June delivery, pulled back to stand at $121.65 per barrel, still up $1.68 from Monday's close.

London's Brent North Sea crude for June also reached an all-time high, at $120.41, before slipping back to $120.07 for a gain of $1.94.

The latest records beat all-time highs set earlier Tuesday. "Market headlines are dominated by the impact of currency fluctuations, geopolitics in the form of actual and potential threats to supply in Nigeria, Iraq and Iran, plus better-than-expected recent US economic data," said Barclays Capital analyst Kevin Norrish.

"Of these three drivers, we think it is supply losses that are the key driver at present."

Nigerian militants attacked an oil ship off the coast of the west African country and took two people hostage over the weekend.

Nigeria, Africa's largest oil producer, has seen an upsurge in violent attacks on its oil industry in the past two years.

Events surrounding Iran, the world's fourth biggest oil producer, gave added support to prices on Tuesday.

Iran said Monday it would reject any offer that violates its right to master the full nuclear fuel cycle after world powers said they had prepared a new package to end the atomic crisis.

The West fears Iran could use uranium enrichment to make atomic weapons. Iran denies it wants to do this and insists it has a right to enrichment to make nuclear fuel as a signatory to the nuclear Non-Proliferation Treaty.

Oil prices also continued to profit on Tuesday from the weak dollar, which helps boost demand for commodities priced in the US unit as they initially become cheaper for foreign buyers.

"US economic data recently has surprised to the upside, with the non-farms and unemployment data on Friday being better than expected," said Sucden analyst Michael Davies.

"However, many would argue that the US economic outlook remains bleak and that recent dollar strength may just be a correction."

The recent record run in oil prices has sparked widespread international concern among consumer nations.

Kuwaiti Oil Minister Mohammad al-Olaim last week said that OPEC may hold an extraordinary meeting on oil prices before a scheduled conference in September and did not appear to rule out higher production.

However, Libya's acting oil minister Chukri Ghanem recently indicated that the Organization of Petroleum Exporting Countries could not pump more crude.

On Tuesday, the Indonesian government said it was considering withdrawing from OPEC, which produces about 40 percent of the world's oil.

Indonesia is the only Southeast Asian member of the oil cartel but declining production levels have turned it into a net importer.

VIA:E.T