Crude oil nears $120 on supply woes, dollar slide

Crude oil futures popped to a fresh record Tuesday as supply threats gathered and the dollar tumbled against the euro. Light, sweet crude for May delivery rose to a new trading record of $119.90 a barrel before retreating to trade up $1.70 at $119.18 on the New York Mercantile Exchange. The May contract expires on Tuesday. More active June Nymex crude was trading at $118.50 a barrel, up $1.87. June Brent crude on the ICE futures exchange was also up $1.62 to $116.05 a barrel, after climbing to a record high $116.75 a barrel. Crude production in Nigeria, already running below capacity because of security problems, was buffeted again after rebels hit two oil pipelines there Monday. Royal Dutch Shell PLC has been unable to gain access to the pipelines, which feed into a key export terminal, a spokesman said. As well, a joint venture that includes Shell said it had been forced to shut in around 169,000 barrels a day of crude exports from its Bonny terminal in southern Nigeria for the rest of April and May after a separate pipeline attack last week. A strike threatened by workers at Ineos PLC's 196,000 barrel-a-day Grangemouth refinery in the UK also stoked worries that a shutdown could disrupt production from North Sea oil fields, including the Forties pipeline system. Through Monday, oil futures have risen 22 percent year-to-date. A mix of production snags and macroeconomic factors have fueled its record run. "The biggest difficulty for oil producers will be if the speculative funds that have flooded into commodity markets moves on," said Mike Fitzpatrick, an analyst at brokerage MF Global, in a note. "While there is no indication that the tidal wave of these funds is anywhere near cresting, it is very easy for them to flow in to and out of markets with the stroke of a computer key, so the higher prices go, the more vulnerable the market is to violent, albeit short reversals." Fitzpatrick said he doubted such a pullback would take place before Wednesday, when the Energy Information Administration delivers its weekly U.S. oil inventory estimates. On average, analysts polled by Dow Jones Newswires expect the data will show crude stockpiles rose by 1.5 million barrels last week, while gasoline stockpiles fell by 2.3 million barrels and distillate stockpiles remained unchanged. The dollar also dropped to a record low against the euro, which was recently at $1.5994. The greenback's decline has generally supported dollar-denominated oil futures as exporters adjust their prices to compensate for its weakness. Dollar deterioration and inflation expectations are "the most important factors" behind oil's price rise, Societe Generale analysts said in a note. "At the same time, the supply and demand fundamentals have been supportive secondary factors, but important nonetheless." In other Nymex trading on Tuesday, May gasoline futures rose 2.59 cents to $3.005 a gallon after earlier rising to a trading record of $3.02, while May heating oil futures rose 0.88 cent to $3.3202 a gallon after earlier rising to their own trading record of $3.35. May natural gas futures fell 8.2 cents to $10.652 per 1,000 cubic feet.