Oil Punches Above $117

Oil Punches Above $117

(FORBES/AP/Thomson Financial) LONDON - Oil continued its meteoric rise Monday, with the price of black gold spiking above $117 a barrel in Asian and European trading, marking a new record high.

The rise followed an attack on a Nigerian oil pipeline owned by Royal Dutch Shell on Friday and comments from an official of the Organization for Petroleum Exporting Countries (OPEC) over the weekend that suggested the cartel did not need to raise production because this would not affect oil prices.

Light, sweet crude for May delivery rose to $117.01 on Monday morning on the New York Mercantile Exchange, from $116.69 late Friday in New York.

On a day when leading European firms were trading lower, shares in oil and gas companies were up an average of 1.3% in Europe on Monday morning. Major gainers were Tullow Oil (other-otc: TUWLF - news - people ), up 2.7% in London, and Total (nyse: TOT - news - people ), up 1.2% in Paris.



Oil prices had already risen $1.83 on Friday, following an attack on a pipeline owned by Royal Dutch Shell (nyse: RDSA - news - people ) by the main militant group in southern Nigeria, the Movement for the Emancipation of the Niger Delta. Shell confirmed on Friday that explosives appeared to have caused a pipeline leak and a small quantity of production had been halted. Since early 2006, attacks by militant groups on Nigeria's oil infrastructure have slashed the country's production of petroleum by nearly a quarter.

Nigeria had 36.2 billion barrels of proven oil reserves as of January 2007, according to Oil and Gas Journal, making it Africa's largest producer of crude oil. The United States is Nigeria's main export partner, taking 42% of its crude exports in 2006.

The Nigerian government is planning to increase its proven reserves to 40 billion barrels by 2010. But the Movement for the Emancipation of the Niger Delta has promised further attacks on Nigeria's petroleum industry. Most of the country's reserves are found along the Niger River Delta, in southern Nigeria.

Meanwhile, comments from an OPEC official on Sunday are likely to keep oil prices buoyant in the coming week. OPEC's secretary-general, Abdullah el al-Badri, said that the cartel would raise production if price pressures on oil were caused by a shortage of supply but that, for the time being, he didn't see supply as the reason behind today's high prices. "Oil prices, there is a common understanding that has nothing to do with supply and demand," he said on the sidelines of an energy conference in Rome. "So there are many other factors other than OPEC."

Al-Badri is right, to an extent. Production from OPEC aside, concerns about supply and demand in the United States and the weak American dollar have also served to support oil prices in recent weeks. Crude prices rose nearly 6% last week.