Page last updated at 22:47 GMT, Friday, 18 April 2008 23:47 UK

Oil reaches $117 for first time

Oil rig
Oil prices have notched up record highs almost weekly for months

Oil prices crossed $117 a barrel for the first time after a militant group in Nigeria said it had attacked a Royal Dutch Shell-operated pipeline.

Confirmation that production had been hit revived US sweet, light crude, which had fallen more than $2 to $112.7 a barrel earlier.

The initial fall was sparked by the dollar's recovery against the euro - a turn-off for oil's foreign buyers.

But supply fears and uncertainty in oil-rich Nigeria erased those declines.

New York sweet light crude closed up $1.83 at $116.96, while London Brent finished up $1.49 to $113.92 - a new all-time high.

"The bulls still hold the cards," said Mike Fitzpatrick at MF Global in New York.

Currency correlations

Nigeria is Africa's largest oil exporter and the eighth-largest oil-producing country in the world.

Rebel attacks since early 2006 on its oil infrastructure in the Niger Delta have disabled the country's normal output by as much as a quarter.

Violence and political uncertainty in key oil-producing nations have helped the oil price notch up a series of records since the beginning of the year amid fears that supply will not be able to meet rampant demand from red-hot emerging economies in Asia, most notably China.

But analysts believe the primary driver of prices has been investors piling into oil and other commodities as a hedge against the weakening US dollar, which also makes resources cheaper for foreign investors.

The dollar has been tumbling since last September when the first signs that the slumping housing market threatened to wipe out profits at some of the world's largest banks became apparent.

This prompted the US central bank, the Federal Reserve, to begin months of aggressive cuts to interest rates - a move that tends to hurt the value of a currency as investors switch to other currencies or investments to get a better return on their capital.

But a lack of nasty surprises in banking giant Citigroup's results earlier - despite further write-downs on bad loans - and a sense that banks are starting to tackle their problems helped to lift confidence in the greenback, which gained some ground against the euro and Japanese yen.

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