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By Jennifer Yousfi
Managing Editor
Oil surged to a new record high yesterday (Monday), as it gained $4 to trade above $120 in morning trading on the New York Mercantile Exchange. A combination of factors was cited for the rise including trouble in Iran and Nigeria, the weak U.S. dollar, and an unexpected increase in the ISM non-manufacturing survey.
U.S. light sweet crude rose to a record of $120.36 a barrel in on the NYMEX before falling back to a record close of $119.97 - up $3.65.
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In Nigeria, a member of the Organization of Petroleum Exporting Countries (OPEC), rebels have been targeting Royal Dutch Shell PLC (RDS.A, RDS.B) pipelines. Members of the Nigerian Movement for the Emancipation of the Niger Delta, or MEND, have claimed responsibility for weekend attack.
The attacks have already forced the Netherlands-based firm to reduce exports by 170,000 barrels, Bloomberg News reported.
Any further attacks "could take more oil off the market," James Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois, told Bloomberg. "There is not much margin for error as far as losing barrels."
Meanwhile, fellow OPEC member Iran released a statement yesterday announcing it would not allow any nation to curtail its nuclear program. Any instability in the region typically puts upward pressure on oil.
Saudi Arabia, the world's largest exporter of oil, has posed a problem for the market by consistently refusing to up production. The Gulf state claims speculators are driving up the price of oil, not an actual increase in demand.
The emaciated dollar is also to blame. The greenback reversed its recent rally and dropped 0.4% against a basket of other major currencies. The dollar index fell as low as 73.19, MarketWatch reported.
However, a recent up tick in the ISM non-manufacturing survey could mean the U.S. economy is on its way towards a recovery. For the first time since December, the April Supply Managers' Non-Manufacturing Index increased 2.4 points to 52, pointing to moderate growth in the service sector.
"The improvement in the services sector is further indication that the slowdown is not as bad as some have feared it could be," Joel Naroff, president and chief economist of Naroff Economic Advisors said in a note to clients.
If the U.S. economy is improving, it could spark further demand for "black gold."
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Oil futures climb past $120 to a fresh record