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Oil strikes new record near $120

Oil strikes a record high at $119.93 as a strike closed a major British oil pipeline and as new violence in Nigeria reignited supply fears.

business Updated: Apr 28, 2008 08:46 IST
Fayen Wong

Oil struck a record high at $119.93 a barrel on Monday, extending the previous session's rally, as a strike closed a major British oil pipeline and as new violence in Nigeria reignited supply fears.

Simmering tensions between the United States and Iran also helped boost oil prices.

US light crude for June delivery rose 88 cents to $119.40 by 2324 GMT, after striking a lifetime high of $119.93 a barrel shortly after electronic trading resumed after the weekend.

London Brent crude rose 66 cents to $117.

"Supply side concerns underpinned the oil price," David Moore, a commodity strategist at the Commonwealth Bank of Australia, said in a note to clients.

"Oil supplies from Nigeria have been disrupted by militant attacks and a strike by some oil workers. A strike at the Grangemouth refinery in Scotland has caused significant disruption to supplies from the North Sea," he said.

The 700,000 barrels per day (bpd) Fortis pipeline, which carries nearly half of Britain's oil, was closed on Sunday as a strike over pensions began at the neighbouring 210,000 bpd Grangemouth refinery in Scotland, operator BP said.

The refinery, owned by international chemical company Ineos, produces a tenth of Britain's petrol and diesel but also supplies vital steam and power to BP's Kinneil plant that processes the crude oil coming ashore from 70 North Sea fields.

The government has said that there will be no overall shortages of fuel but conceded that there may be some local supply problems, particularly in Scotland and northern England.

BP said that assuming it got power back as soon as the strike ended and Fortis fields resumed production rapidly, the pipeline could be back in operation within 24 hours but might take a few more days to get back to full flow.

In Nigeria, unidentified gunmen killed five policemen and seized several weapons in a raid on a police station in the oil-rich southern Nigerian state of Rivers on Sunday, a police spokeswoman said.

The attack comes just two days after a strike and attacks by rebels forced Nigeria's two largest oil firms, Exxon Mobil and Royal Dutch Shell, to shut some production.

The strike forced Exxon to shut down 200,000 bpd of crude output, a senior union official said, while Shell has already been forced to shut 169,000 bpd of Bonny Light crude production after a pipeline attack in the Delta a week ago.

A step up in tensions between US and the world's fourth-largest crude exporter Iran also contributed to oil's gain.

A cargo ship hired by the US military fired warning shots at boats suspected to be Iranian, the US Navy said on Friday, underscoring tension in the Gulf as the Pentagon sharpened its warnings to Tehran over its nuclear ambitions.

Iran denied there had been any confrontation between its forces and a US ship, Iranian media reported, and said on Sunday a "disastrous situation" facing the United States in Iraq and Afghanistan, coupled with Washington's domestic issues, made any US attack on the Islamic Republic unlikely.

Tensions between Washington and the OPEC nation last year helped send oil to record highs. Crude prices have surged more than five-fold since 2002 as supplies struggle to keep pace with rising demand in emerging economies, such as China.

Crude oil speculators on the New York Mercantile Exchange increased net long positions in the latest week, according to data from the Commodity Futures Trading Commission released on Friday.

Net crude long positions rose to 70,562 in the week to April 22, up from 66,526 in the week to April 15.