Oil prices surge to new records on supply woes, weak dollar


(Gold9472: I paid $3.25 a gallon at the pump yesterday for regular. 7 years ago, it would have cost me $1.25 a gallon.)

Published: Monday April 14, 2008

World oil prices surged Monday, although London prices failed to hold on to record peaks, amid fresh supply jitters and lingering concerns about the ailing US dollar, traders said.

Prices in New York held close to record highs of above 112 dollars which were struck last week on news of falling energy stockpiles in the United States.

New York's main oil futures contract, light sweet crude for delivery in May, closed up 1.52 dollars at 111.76 dollars a barrel compared with Friday's close, marking a record closing high.

The contract had rocketed to a record 112.21 dollars last Wednesday.

In London, Brent North Sea crude for May delivery settled down 1.09 dollars at 109.84 dollars shortly after the contract broke through the 110-dollar barrier for the first time.

Brent oil briefly traded at a record 110.01 dollars before receding as the London market closed for the day.

Traders seized on fresh supply concerns in the United States, which is the world's biggest economy and the largest global consumer of energy.

Analysts said reports of a temporary shutdown to repair a small leak in Shell's Capline pipeline system, which transports oil into the US Midwest, helped to boost prices.

"Supply and demand factors remain tight, so any prolonged closures of the Capline pipeline could push (the) crude price even higher amid declining inventories in the US Midwest region," said analysts at the Sucden brokerage in London.

However, they warned: "Because this matter is simply a logistics problem, any price surge as result of this closure would most likely be short term."

Meanwhile, Petroleos Mexicanos, the third largest supplier to the United States, closed two oil export terminals in the Gulf of Mexico due to bad weather.

The market was also boosted by the flagging US dollar. A weak US currency encourages demand for dollar-priced goods, such as crude oil, as it can make them more affordable for buyers holding other currencies.

"Oil prices should remain firm this week as currency market movements prove central to developments," analysts at energy consultancy John Hall Associates said in a note to clients.

Elsewhere, fresh geopolitical jitters emerged in Nigeria, which is the biggest crude producer on the African continent.

Nigerian security forces have arrested four Americans and their Nigerian host for visiting the oil-rich but restive Niger Delta without authorization, a military spokesman said.

Unrest in the Niger Delta region has slashed crude production by about a quarter since January 2006.

Earlier Monday, prices had fallen due to expectations of a drop in worldwide crude demand after Group of Seven (G7) finance chiefs expressed deep concern over the US economy, analysts said.

The world economy "continues to face a difficult period... (and) near-term economic prospects have weakened," the G7 officials said in a statement after their weekend meeting in Washington.