Oil price soars close to $120 a barrel

World oil prices jumped to record peaks above $119 in response to the weak US dollar, unrest in Nigeria and OPEC's reluctance to hike output.

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Global supply jitters have seen oil contracts traded in New York spike by more than $US57 in the past year, sparking concerns that sky-high prices could harm US economic growth which has already slowed sharply.

New York's main oil futures contract, light sweet crude for delivery in May, closed at a record $119.37 a barrel, up a hefty $1.89 compared with Monday's closing level.

Buyers and speculators had pushed the contract's price to an all-time intraday peak of $119.90 in earlier trading.

Prices also hit new highs in London. Brent North Sea crude for June delivery hit a record $116.75 a barrel in intra day activity before settling at an all-time high of $115.95, marking a $1.52 gain from Monday.

“For the moment, there does not seem to be anything stopping the price juggernaut we are seeing in energy,” said MF Global analyst Ed Meir.

China, India expansion

Analysts say rapid economic growth in China and India is also fuelling increased demand for oil and further contributing to the global price spike.

A weakening US dollar has also spurred oil demand. International oil prices are quoted in dollars, so crude becomes cheaper for purchasers holding foreign currencies that have jumped in value against the ailing dollar.

Oil prices accelerated as the euro briefly hit a record $1.60 amid downbeat US economic news, including another dour report on the troubled housing market.

“The (oil) market is still fairly tight, with OPEC reluctant to hike output, blaming speculators and the broad weakness in the dollar for driving prices higher,” said Sucden analyst Andrey Kryuchenkov.

Nigeria output down

Global supply worries were stoked after Anglo-Dutch oil group Royal Dutch Shell reported an output loss of 169,000 barrels per day (bpd) due to acts of sabotage against its key pipelines in southern Nigeria.

Shell spokesman Precious Okolobo said the production loss followed a weekend attack on a pipeline feeding the Bonny exports terminal and damage wrought on Monday against the Soku-Buguma and Buguma-Alakiri pipelines.

Shell said on Monday that it might not be able to honour oil contracts for April and May after the attacks.

The Movement for the Emancipation of the Niger Delta (MEND) militant group, which is active in Nigeria's oil-rich south, claimed responsibility for the attack on the Bonny terminal.

Violence in the southern Delta region has cut Nigeria's total production by a quarter since January 2006.

OPEC to increase capacity

The price rises also came despite news that the Organization of the Petroleum Exporting Countries (OPEC) plans to increase its production capacity by five million bpd by 2012, the cartel's secretary general Abdalla Salem El-Badri said Tuesday.

El-Badri said OPEC aimed to boost production capacity by nine million bpd by 2020. The current output of the oil producer's cartel stands at about 32 million bpd.

The 13-nation group, which produces 40 percent of the world's oil, insists there is no global shortage of oil, and has blamed record prices on market speculators.