Crude futures reached $122 a barrel inTuesday's trading as supply disruptions, overseas growing demand outlook and a falling dollar sent the prices to new all time records.
Crude oil futures for June delivery rose $1.95 or 1.63 to $121.92 a barrel on the New York Mercantile Exchange on Tuesday at 1:24 p.m. Earlier, prices hit $122.
Bomb attacks in Nigeria and tension in Iran and Iraq raised concerns that the oil-rich countries could strain supplies of crude.
In Nigeria Shell said its production was affected by militant attacks over the weekend and confirmed its output was still down by about 164,000 barrels a day. Meanwhile Exxon Mobil said today its production in Nigeria returned to normal after a labor strike that lasted 8 days.
Yesterday, prices settled at $119.97 a barrel rising more than $3 above Friday's closing price on Nigeria's news.
Iran rejected intrusive inspections of its nuclear program which western countries are speculating is linked to the making of nuclear weapons. Ayatollah Ali Khamenei , Iran's leader, said the nation will not bend to international pressure and give up its nuclear program. Iran says the program is for peaceful purposes.
In Iraq Kurdish rebels threatened suicide attacks against American interests to punish the U.S. for sharing intelligence with Turkey which has bombed Kurdish bases established in northern Iraq.
Analysts speculate that despite a drop in U.S. demand for oil may weaken amid the credit crisis, overseas demand from China and India seems to compensate consumption since the economy of both countries is growing by double digits.
A report from analysts at Goldman Sachs predicted oilwill trade between $150 and $200 a barrel over the next six to 24 months. The report also forecasts that oil could hit $125 this year and $200 in 2009 but declining to $150 in 2010.
Supporting prices today, the dollar fell, driving investors to buy commodities as a hedge against inflation. A weak dollar also increases demand for commodities which are denominated in the U.S. currency and become cheaper for foreign buyers.
The dollar has declined as the U.S. Federal Reserve has cut interest rates since September to spur economic growth.
Brent crude futures for delivery in three months rose $4.97 or 4.33 percent to $119.74 a barrel on the London ICE Futures Exchange today.
A report on U.S. crude inventories is due on Wednesday and is expected to show crude supplies rose 1.8 million barrels, distillate inventories rose 1.1 million barrels and gasoline stocks dropped 100,000 barrel.