Crude Settles +3% After $120.36 Record

NEW YORK, May 5, 2008 (Dow Jones Newswires)

Crude oil futures prices surged to a record high above $120 a barrel Monday, but settled just below that mark, spurred by renewed concerns over tightening supplies ahead of the peak demand summer driving season.

Analysts said a settlement above $120 a barrel would be a clear indication of a surge to $125 a barrel and beyond.

Light sweet crude oil for June delivery settled at a record $119.97 a barrel, but was 39 cents below the record intraday peak of $120.36 a barrel hit earlier in the session.

"Above $120 a barrel, we're looking for $125," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "This is a technically driven market and is a magnet for magic numbers," referring to $5 increments in prices. "Nobody wants to step in front of this thing," he said.

Analyst Stephen Schork, who edits the Schork Report, in Villanova, Pa., said if the market can move through uncharted territory above $120 and $125 a barrel, a jump above $130 may be in the cards.

The spark was another rebel attack over the weekend on oil producing facilities in Nigeria, a major supplier of light, sweet crude oil especially favored at this time of year for its high gasoline yield.

"Upwards of 600,000 barrels a day of production is currently offline in Nigeria and a further deterioration of the security situation there will raise concerns," said Addison Armstrong, an analyst at Tradition Energy, a brokerage in Stamford, Conn.

Royal Dutch Shell confirmed damage to oil delivery lines in the Bonny Light oil terminal and said unspecified levels of production were shut in, but expected the impact on supplies to be limited. The latest attack follows the shut in of another 164,000 barrels a day by Shell due to an attack.

Analysts said the market will be closely watching the situation in Nigeria, where the former leader of the rebel group The Movement for the Emancipation of the Niger Delta, or MEND, Henry Okah is scheduled to go on trial this week.

Nigeria has been the fourth-largest oil supplier to the U.S. in recent months, accounting for more than 10% of crude oil imports in the world's biggest oil consumer.

News of a planned one-day strike on May 9 by workers at the port of Marseilles, France, which could impact operations of the nation's major oil terminals, Fos-Lavera, also stimulated interest on the upside, traders said.

Iran's continued refusal, in the face of Western demands, to halt its nuclear program also underpins the market, traders said. Iran is OPEC's second-largest oil producer and sits on the edge of the vital Strait of Hormuz, a major transit point for vital Middle East crude oil flows.

President George W. Bush will make "very clear" to Saudi Arabian officials his concerns over record high oil prices during a visit to the kingdom on a May 13-18 Middle East trip, White House spokesman Scott Stanzel said. Earlier this year, the president pressed Saudi King Abdullah to boost output to bring down prices, but Saudi-led OPEC didn't do so.

RBOB gasoline blendstock and heating oil futures posted strong gains, but didn't reach the record highs of recent weaks, despite crude's fresh high.

June gasoline settled up 8.65 cents higher at $3.0529 a gallon after a high of $3.0578 a gallon, the highest level since April 28. Heating oil futures settled 8.78c higher at $3.3065 a gallon after a high of $3.3300 a gallon, the highest since April 24.

On the Intercontinental Exchange, North Sea Brent crude set an intraday high of $118.58 a barrel before settling at a record $117.19 a barrel.

NEW YORK, May 5, 2008 (Dow Jones Newswires)