Crude Oil Settles Above $119 for the First Time
Oil surged almost $2 to close at a record settling price above $119 a barrel on Tuesday as supply concerns from Nigeria and the North Sea propelled crude higher.
U.S. light, sweet crude finished at $119.37 on the New York Mercantile Exchange after hitting an all-time intraday peak of $119.90 earlier.
London Brent crude gained $1.42 to trade at $115.85 a barrel, after rising to a record peak of $116.75.
Oil's fresh highs have extended a rally that has seen prices climb more than five-fold since 2002, driven by booming demand from emerging markets, such as China, that has coincided with long-term supply constraints.
The slumping U.S. greenback, which tumbled to fresh lows against the euro Tuesday, has also helped boost dollar-denominated commodities like oil and attracted speculative inflows from hedge funds.
"The trend is up and the market didn't break down when it moved lower in the morning, and you have the weak dollar and the supply disruptions are in the mix," said Eric Wittenauer, analyst at Wachovia Securities.
Pipeline attacks in OPEC member Nigeria last week shut 169,000 barrels per day (bpd) of Bonny Light production, forcing Royal Dutch Shell Plc to declare force majeure on crude oil exports.
Nigerian rebels also attacked two Shell oil pipelines in the Niger Delta Monday.
Management and union officials are in talks to avoid a planned two-day strike at Scotland's Grangemouth refinery, which could force the shut-in of some oil and natural gas production from the North Sea.
Oil producers gathered in Rome for the International Energy Forum said they can do nothing to halt oil's rally and the world might have to live with even higher prices if it wants supplies for the future.
Ali al-Naimi, oil minister to OPEC kingpin Saudi Arabia, Tuesday said a lack of investment in crude and refining capacity — not a lack of reserves — was driving prices higher.
"Recently, I have observed an unprecedented level of uncertainty, doubt and even fear in discussions about the future of energy and its impact on global economic prospects," Naimi said.
"I can assure you unequivocally that the world is not running out of oil." Rising energy costs and the wider U.S. economic crisis have forced analysts to revise downward oil demand growth forecasts for the world's largest consumer, which has lobbied OPEC to increase output to help lower prices.
President Bush on Tuesday said he was concerned about record-high crude oil and gasoline prices, and said the United States needs to tap an Alaskan wildlife refuge to boost supply.
Despite the U.S. economic woes, demand from emerging economies continues to rise.
China's oil demand leapt 8 percent in March from a year ago, the fastest rate in 19 months as refiners boosted imports ahead of the Olympics.