Oil set a new record high of $122 a barrel on Tuesday, the latest spurt in an advance that has seen prices double over the past 12 months.
Supply disruptions in Nigeria, where a strike and attacks by militants has hit production, have helped boost a market that is nervous about any threats to supply.
Tensions with Iran racheted higher when the world’s fourth-biggest oil producer refused to accept intrusive inspections of its nuclear programme that the West fears could be linked to weapons.
United States light crude for June delivery was up $1,79 at $121,76 a barrel, by 14.12pm GMT after earlier touching a record high of $122.
London Brent crude was up $2,29 at $120,28 a barrel, after an earlier record of $120,35.
Gold was also strong, as oil’s advance helped spur a rebound from a four-month low last week. But gold is still some way below a record of $1 030,80 an ounce reached on March 17.
Goldman Sachs predicted oil could soar towards $150 to $200 a barrel because of a lack of adequate supply growth.
”The possibility of $150 to $200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,” the bank said.
The US investment bank had predicted back in 2005 that oil was entering a ”super-spike” period.
”The downward move in oil last week now seems like only a correction,” said Christopher Bellew, senior vice-president at Bache Commodities.
”The effect of the credit crisis in the United States is reducing people’s disposable incomes and you’d expect this to have an impact on the oil price, but it’s not having any impact.”
Demand from emerging markets such as India and China is more than compensating for the US downturn, he said.
Oil prices further into the future have also risen sharply, with prices out to 2016 above $110 a barrel.
Vulnerable
Oil has nearly doubled in the past year and is up by a quarter since the start of 2008 partly due to the problems in Nigeria, plus weakness in the US dollar, which has boosted the price of commodities denominated in the US currency.
Last week, oil retreated almost $10 a barrel, partly due to a reduction in speculative positions and as strikes affecting Nigeria and the North Sea came to an end.
Exxon Mobil said on Tuesday it had returned oil output in Nigeria to normal levels after an eight-day strike, but Shell said its production there was still down by about 164 000 barrels a day due to recent militant attacks.
”A lot of this is supply-driven, with the market very vulnerable to any disruption in supplies,” said Mark Pervan, a senior commodities analyst at the Australian & New Zealand Bank.
”We’re seeing large oil-producing countries coming up as a question mark,” he said.
US President George Bush is expected to talk with officials from Saudi Arabia about the effects of high fuel prices on the US economy on his trip to the world’s top exporter later this month.
Bush has called on the Organisation of the Petroleum Exporting Countries to raise output to help bring down prices.
The US dollar, whose decline in the past months has been driving speculative investments in dollar-denominated crude and other commodities, was weaker versus the euro on Tuesday on continued doubts about the health of the US economy despite upside surprises from recent economic indicators.
Later in the week on Wednesday, traders will watch the weekly US government report on fuel inventories, which is expected to show a 1,8-million-barrel build in crude stocks, a 1,1-million-barrel rise in distillate inventories and a 100 000-barrel fall in gasoline stocks. – Reuters