Crude oil edges close to $120 mark

Crude oil rose to a record, trading near $120 a barrel in New York, after BP Plc shut a North Sea pipeline and gunmen attacked police guarding Nigeria's largest oil and gas terminal.

BP closed the Forties Pipeline System, carrying 40 percent of the United Kingdom's oil production, after a strike at the Grangemouth refinery cut power supplies. Five policemen were killed in yesterday's attack in the Niger Delta, where output has dropped by 50 percent since Friday, adding to concern about supplies before the Northern Hemisphere summer driving season.

"The drivers for oil to go to $130 are still intact," said Andy Sommer, an analyst with HSH Nordbank in Hamburg. "We have the refinery strike in Scotland and the market is more nervous now that attacks will continue in Nigeria."

The Organization of the Petroleum Exporting Countries (OPEC), that produces more than a third of the world's oil, has refused to pump more, saying the market is adequately supplied.

OPEC President Chakib Khelil blamed the fall in the US dollar for high prices and did not rule out prices rising to $200 a barrel.

"Without geopolitical problems and the fall in the dollar, the prices of oil would not be at this level," he told the Algerian newspaper El Moudhajid.

Crude oil for June delivery rose as much as $1.41, or 1.2 percent, to $119.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since the futures began trading in 1983. It was at $119.48 at 9:35 am in London. Prices have surged 82 percent in the past year.

The contract jumped 2.1 percent to $118.52 a barrel on Friday when the refinery strike and pipeline closure were announced.

New York oil futures are 82 percent higher than a year ago. Investors have purchased contracts as a hedge against the dollar as it fell to a record low against the euro and as an alternative to flagging equities markets. The benchmark US S&P 500 Index has dropped 9.8 percent since the start of the year.

'Substantial production'

"The production affected at the moment is pretty substantial," said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd in Sydney.

Brent crude for June settlement rose as much as $1.16, or 1 percent, to $117.50 a barrel on London's ICE Futures Europe exchange and was trading at $117.35 a barrel at 9:36 am in London. It reached a record $117.56 on Friday.

Refinery production at Grangemouth will resume today at 7 am local time. Units crucial to restart flows on the Forties pipeline will have priority, said Richard Longden, spokesman for operator Ineos Group Holdings Plc.

Oil grades from the North Sea and Nigeria, Africa's biggest producer, are low in sulfur and favored by refiners.

Nigeria is losing about 50 percent of its output after staff at Exxon Mobil Corp's operations went on strike April 24 and militants attacked a Royal Dutch Shell Plc pipeline later the same day.

Agencies

(China Daily 04/29/2008 page17)