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Wednesday May 7, 7:58 PM
Oil prices bubble under 122 dollars per barrelWorld oil prices neared record levels close to 122 dollars per barrel on Wednesday as traders awaited a crucial weekly update on American energy reserves amid concern about tight global supplies. New York's main oil futures contract, light sweet crude for June delivery, eased ten cents to 121.74 dollars, after hitting a lifetime peak of 122.73 dollars on Tuesday.
Runaway oil prices have almost doubled in the past year and have surged by more than 20 dollars since the beginning of 2008. The market was also boosted this week after Goldman Sachs forecast that prices could strike 200 dollars per barrel within the next two years. The US investment bank had famously and correctly predicted three years ago that oil would break through 100 dollars -- which it did in January. "Crude oil prices were trading (on Wednesday) around 122 dollars, with the weekly EIA data out later today keeping the market on edge," said Sucden analyst Michael Davies. The US government's Energy Information Administration was due later Wednesday to reveal the state of American energy inventories for the week ending May 2. Ongoing violence in Nigeria -- Africa's largest crude producer -- had helped push oil prices to record peaks on Tuesday, traders said. "Support stemmed from continued unrest in Nigeria where a string of attacks by rebels calling for a greater share of the country's oil wealth have shut-in a sizeable element of its production," said analysts at energy consultancy John Hall Associates. "Concerns over further Turkish incursion into Iraq in pursuit of Kurdish separatists also underpinned price movements." Nigerian militants attacked an oil ship off the coast of the west African country and took two people hostage over the weekend, a military spokesman said Sunday. The incident on Saturday came after an attack on Shell oil wells and a flow station in southern Bayelsa state, leading to a cut in the company's output. Such attacks have cut Nigeria's production by about a quarter over the past two years. David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney, said sentiment remained buoyant after Tuesday's sharp gains. "While issues on the supply side are being progressively resolved... they highlight the risks of oil production going forward," said Moore. He added that "Iran may also add a little risk element" in the near term. Iran said Monday it would reject any offer that violates its right to the full nuclear fuel cycle after world powers said they had prepared a new package to end a long-running standoff over its nuclear programme. Oil players fear the ongoing tension could result in Iran using oil as a bargaining chip. Iran is the second-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC) cartel.
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