Page last updated at 06:25 GMT, Wednesday, 23 April 2008 07:25 UK

Oil pauses for breath near $120

Oil tanker
The price of oil has nearly doubled in the past year

Oil prices have paused for breath after a series of steep daily rises which saw them approach $120 a barrel on Tuesday.

US light, sweet crude eased to $118.11 in Asian trading, having risen as high as $119.90 on concerns that violence in key producing nations will hurt supply.

London's Brent crude peaked at $116.75 a barrel on fears of further attacks on pipelines in Nigeria, falling output in Mexico and the continued weak dollar.

Opec has shown itself disinclined to raise quotas to curb rising prices.

Nigerian instability

This stance by the oil cartel, allied to the weak dollar and persistent worries about whether supplies can meet global demand in the long term, has pushed up prices 24% this year.

The bulls are certainly in control of the oil market right now
Victor Shum, Purvin & Gurtz

Fresh upward pressure on prices could come on Wednesday, with figures expected to show a further decline in weekly US petrol inventories.

"The bulls are certainly in control of the oil market right now," said Victor Shum, from energy consultants Pervin & Gertz.

Events in Nigeria, where attacks on Royal Dutch Shell's pipelines have led to a drop in production of about 169,000 barrels a day, have underpinned the latest price surge.

Anti-government attacks on the region's oil infrastructure have been escalating for the past few years, threatening future investment in the country's oil output.

Shell has said it would be unable to honour its contractual obligations at the Bonny terminal in Nigeria's Delta region for production contracts in April and May.

Meanwhile, figures released by Mexico's government showed that output declined nearly 8% in the first quarter of the year, as some key oil fields reach the end of their natural life.

The continued rally was supported by comments by Opec secretary general Abdalla Salem el-Badri that real demand was being well matched by current supply with no immediate need to lift production levels before 2012.

He said he did not expect to discuss whether prices were too high or too low at an energy forum in Rome attended by government ministers and oil firm bosses.

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