Oil prices steady after rising to trading record near US$123 a barrel in previous session

The Associated Press ,  Singapore   |  Wed, 05/07/2008 3:36 PM

Oil prices steadied in Asian trading Wednesday after hitting a record near US$123 a barrel in the previous session on worries over supply disruptions.

Prices were supported by concerns about supply disruptions in Nigeria, where production at a Royal Dutch Shell PLC facility was cut after a weekend attack. The main militant group in Nigeria's oil-rich southern region said Tuesday it is willing to cease hostilities if the federal government allows conflict mediation by a former U.S. president.

A string of pipeline bombings in recent weeks has cut oil production in Nigeria by tens of thousands of barrels per day, contributing to the sharp rise in oil prices. The country is Africa's largest producer and a major U.S. supplier.

Light, sweet crude for June delivery rose 21 cents to US$122.05 a barrel in electronic trading on the ew York Mercantile Exchange by midafternoon in Singapore. The contract on Tuesday soared to a record US$122.73 a barrel before retreating to settle at US$121.84, up US$1.87.

"Clearly there's a lot of concerns about supply at the moment. The market's very jittery on any type of news, particularly supply dsruptions," said Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne.

"There are many in the market who think these prices are as good as it gets and are positioned to see lower prices but we continue to see one-off supply issues keeping prices high," Pervan said.

The rise in crude futures also gained momentum Tuesday as investors bought on a Goldman Sachs prediction that oil prices could rise to US$150 to US$200 within two years.

Expectations that U.S. crude supplies increased last week were helping to limit oil's rise ahead of the release of the U.S. Energy Information Administration's report on fuel inventories later Wednesday.

Analysts surveyed by energy research firm Platts expected the report to show that crude oil inventories rose by 1.5 million barrels last week.

Gasoline stocks were projected to drop by 500,000 barrels, according to the Platts survey. Inventories of distillates, which include heating oil and diesel, were expected to have risen by
1.3 million barrels.

In other Nymex trading, heating oil futures rose 0.70 cent to US$3.3605 a gallon (3.8 liters) while gasoline prices rose 0.4 cent to US$3.1095 a gallon. Natural gas futures lost 2.8 cents to
US$11.122 per 1,000 cubic feet.

In London, Brent crude futures rose 31 cents to US$120.62 a barrel on the ICE Futures exchange.(**)

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