Oil strikes new record near $120 on supply fears

PERTH (Reuters) - Oil struck a record high at $119.93 a barrel on Monday, extending the previous session’s rally, as a strike closed a major British oil pipeline and as fresh violence in Nigeria reignited supply fears.

A sign board showing fuel prices is pictured at a petrol station in Dortmund, April 25, 2008. REUTERS/Ina Fassbender

Simmering geopolitical tensions between the United States and Iran also helped boost oil prices.

U.S. light crude for June delivery rose 81 cents to $119.33 by 2249 GMT, after striking a lifetime high of $119.93 a barrel at the start of Globex electronic trade.

U.S. oil settled $2.46 higher at $118.52 a barrel on Friday.

London Brent crude rose 66 cents to $117.

“Supply side concerns underpinned the oil price,” David Moore, a commodity strategist at the Commonwealth Bank of Australia, said in a note to clients.

“Oil supplies from Nigeria have been disrupted by militant attacks and a strike by some oil workers. A strike at the Grangemouth refinery in Scotland has caused significant disruption to supplies from the North Sea,” he said.

A pipeline carrying nearly half of Britain's oil was closed on Sunday as a strike over pensions began at the neighboring Grangemouth refinery in Scotland, operator BP BP.L said.

The refinery, owned by international chemical company Ineos, produces a tenth of Britain’s petrol and diesel but also supplies vital steam to BP’s Kinneil plant that starts to process the crude oil coming ashore from 70 North Sea fields.

In Nigeria, unidentified gunmen killed five policemen and seized several weapons in a raid on a police station in the oil-rich southern Nigerian state of Rivers on Sunday, a police spokeswoman said.

The attack comes just two days after a strike and attacks by rebels forced Nigeria's two largest oil firms, Exxon Mobil XOM.N and Royal Dutch Shell RDSa.L, to shut in some production.

A step up in tensions between U.S. and the world’s fourth-largest crude exporter Iran also contributed to oil’s gain.

A cargo ship hired by the U.S. military fired warning shots at boats suspected to be Iranian, the U.S. Navy said on Friday, underscoring tension in the Gulf as the Pentagon sharpened its warnings to Tehran.

Iran denied there had been any confrontation between its forces and a U.S. ship, Iranian media reported.

Iran also said on Sunday a “disastrous situation” facing the United States in Iraq and Afghanistan, coupled with Washington’s domestic issues, made any U.S. attack on the Islamic Republic unlikely.

Tensions between Washington and the OPEC nation last year helped send oil to record highs. Crude prices have surged more than five-fold since 2002 as supplies struggle to keep pace with rising demand in emerging economies, such as China.