Published: May 07, 2008 11:25 am            

Oil steady above $122 after hitting record

VIENNA, Austria (AP) — Oil prices steadied Wednesday after hitting a record near $123 a barrel in the previous day's session on worries over supply disruptions.

Prices were supported by concerns about supply disruptions in Nigeria, where production at a Royal Dutch Shell PLC facility was cut after a weekend attack. The main militant group in Nigeria's oil-rich southern region said Tuesday it is willing to cease hostilities if the federal government allows conflict mediation by a former U.S. president.

A string of pipeline bombings in recent weeks has cut oil production in Nigeria by tens of thousands of barrels per day, contributing to the sharp rise in oil prices. The country is Africa's largest producer and a major U.S. supplier.

Light, sweet crude for June delivery rose 5 cents to $121.89 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract on Tuesday soared to a record $122.73 a barrel before retreating to settle at $121.84, up $1.87.

"Clearly there's a lot of concerns about supply at the moment. The market's very jittery on any type of news, particularly supply disruptions," said Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne.

"There are many in the market who think these prices are as good as it gets and are positioned to see lower prices but we continue to see one-off supply issues keeping prices high," Pervan said.

The rise in crude futures also gained momentum Tuesday as investors bought on a Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years.

Still, expectations that U.S. crude supplies increased last week were helping to limit oil's rise ahead of the release of the U.S. Energy Information Administration's report on fuel inventories later Wednesday.

Analysts surveyed by energy research firm Platts expected the report to show that crude oil inventories rose by 1.5 million barrels last week.

Gasoline stocks were projected to drop by 500,000 barrels, according to the Platts survey. Inventories of distillates, which include heating oil and diesel, were expected to have risen by 1.3 million barrels.

In its newsletter, Vienna's JBC Energy noted that the latest EIA forecasts on demand — an estimated 170,000 barrels a day lower in the second quarter of this year over the same period last year — also worked to keep a lid on prices and offered its own, lower forecast decline; 230,000 barrels a day.

In other Nymex trading, heating oil and gasoline futures were both up slightly at $3.3568 and $3.1024 a gallon. Natural gas futures were flat at $11.146 per 1,000 cubic feet.

In London, Brent crude futures rose 4 cents to $120.35 a barrel on the ICE Futures exchange.

        

• Click to discuss this story with other readers on our forums.