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Nigeria attacks help push oil to $120 a barrel

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Nigeria attacks help push oil to $120 a barrel

By Chris Flood

Published: May 6 2008 03:00 | Last updated: May 6 2008 03:00

Oil hit record levels above $120 a barrel yesterday amid growing hopes the US economy might avoid recession and on further supply disruptions in Nigeria.

Nymex June West Texas Intermediate hit $120.21 a barrel before easing back at the close to settle $3.65 higher at $119.97 a barrel. In electronic trading ICE June Brent surged $3.43 to close at $117.99, after hitting a record of $118.50.

Hopes that the US could avoid recession were bolstered by an unexpected increase in the April ISM service-sector survey, which followed better than expected jobs data on Friday.

In Nigeria, Shell was on Saturday forced to close more of its production after another attack by militants. Shell had closed 164,000 barrels a day of production because of violence that has led to five attacks on pipelines and oil facilities in the past month.

Over the weekend, a Nigerian court ruled that Henry Okah, the leader of the rebel Movement for the Emancipation of the Niger Delta, should be tried in secret.

Geopolitical concerns also provided support for crude prices after airstrikes by the Turkish military on Kurdish rebels in northern Iraq last week.

Tensions over Iran’s nuclear ambitions rose after Tehran said it would not consider any incentives that violated its right to nuclear technology. On Friday, six world powers offered a new package of incentives designed to stop Iran from continuing its programme of uranium enrichment, which many western countries suspect is preparation to build a nuclear weapon.

The latest data on speculative positioning from the Commodity Futures Trading Commission showed a drop in the number of hedge funds betting on further price gains for crude with the net long position (bets on prices rising) down by 24.5 per cent to 53,311 lots in the week ending April 29.

Oil reached a record high of $119.93 on April 28 and the failure to breach the $120 mark, when there was a substantial amount of call options open at that level, may have encouraged some hedge funds to bet that prices would retreat with the CFTC data showing an 11 per cent increase in the gross speculative short position.

Gold rose 1.7 per cent to $870.20 a troy ounce from New York’s late quote of $855.80 on Friday, helped by bargain hunters and support from strong oil prices. Gold sank to a four-month low of $845 during Friday’s session as the dollar rallied after the US employment data. A recovery above $850 could prove important for sentiment as this was the historic peak, which lasted from January 1980 until gold breached the $1,000 mark this year.

“Gold prices have been heavily influenced since last August by credit market difficulties and the US Federal Reserve’s attempts to remedy related woes,” said James Steel of HSBC, who noted that central banks were now taking co-ordinated action to deal with the credit crisis. “The latest efforts by the monetary authorities to find a solution may have important ramifications for gold,” Mr Steel said.

Agricultural commodities weakened with CBOT May corn down 4¼ cents at $5.97¾ a bushel. More wet weather is expected in the US Midwest this week, further delaying the planting of this year’s crop.

CBOT May wheat lost 4 cents at $7.92 a bushel and CBOT May soyabeans lost 14½ cents at $12.78 a bushel.

Copyright The Financial Times Limited 2008 

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