Singapore: Oil steadied on Tuesday after surging more than $4 to a record over $120 a barrel in the previous session, on a softer U.S. dollar and supply concerns in Iran and Nigeria.
U.S. light crude for June delivery rose 19 cents to $120.16 a barrel by 0232 GMT, after rising to a peak of $120.36 a day ago.
London Brent crude was up 20 cents at $118.19 a barrel, after touching a record $118.58 on Monday.
“A lot of this is supply-driven, with the market very vulnerable to any disruption in supplies,” said Mark Pervan, a senior commodities analyst at the Australian & New Zealand Bank.
“We’re seeing large oil-producing countries coming up as a question mark,” he said. Geopolitical uncertainties in Iran lent support after the world’s No.4 oil producer said on Monday it would not consider any incentive offered by world powers that would constrain its right to nuclear technology.
Iran’s nuclear issue added to growing violence in Nigeria, the world’s eighth-largest oil exporter, where Royal Dutch Shell had to shut more of its production after a militant attack on Saturday in the oil-rich Niger Delta.
Renewed clashes between Turkey and Kurdish rebels in northern Iraq last week also helped lift oil prices. U.S. President George W. Bush, who has called upon oil cartel OPEC to increase output to help bring down prices, is expected to talk with officials from Saudi Arabia about the effects of high fuel prices on the U.S. economy on his trip to the world’s top exporter later this month.
The U.S. dollar, whose softening in the past months has been driving speculative investments in dollar-denominated crude and other commodities, slipped further on Tuesday on continued doubts about the health of the U.S. economy despite upside surprises from recent economic indicators.
“There’s a very large short position sitting on oil, and these short positions are being rebuilt at the moment,” ANZ Bank’s Pervan said. U.S. payrolls fell by 20,000 jobs in March, a quarter of the losses expected, government data showed on Friday, while a Monday report from the Institute for Supply Management showed the U.S. service sector grew unexpectedly in April.
Later in the week on Wednesday, traders will eye the weekly U.S. government report on inventories, which is expected to show a 1.8 million-barrel build in crude stocks, a 1.1 million-barrel rise in distillate inventories and a 100,000-barrel fall in gasoline stocks.