Oil smashes through $120 barrier

RECORD HIGH: Oil has smashed through the $120 mark, spurred by supply concerns. (Getty Images)

Oil hit new all-time high on Tuesday, breaking through the $120 per barrel mark on supply concerns and a forecast of oil reaching over $200 a barrel within two years.

US crude for June was down 4 cents at $121.80 a barrel by 0236 GMT on Wednesday, off the previous day's new intraday all-time high of $122.73. The contract settled up $1.87 at a record $121.84.

London Brent crude was 16 cents lower at $120.15 a barrel, down from the record $120.99 hit on Tuesday.

"The market is in a waiting mode before US inventory data comes out," said Yusuke Seta of brokerage company New Edge.

A weekly US government report on fuel inventories is expected to show a 1.6 million barrel build in crude supplies, an 800,000 barrel rise in distillate inventories and a 100,000 barrel decline in gasoline stocks, a poll by newswire Reuters showed.

Analysts said a higher-than-expected draw in crude or gasoline stocks in the world's largest energy consumer could pull prices higher.

The US Energy Information Administration (EIA) petroleum inventory data is due out on Wednesday at 1430 GMT.

Oil's new records on Tuesday extended a rally that has seen prices double over the past year, and led some experts to forecast a potential spike to $200.

Oil could shoot up to $200 in the next two years as part of a "super-spike" driven by poor growth in oil supplies, investment bank Goldman Sachs said in a research note.

The forecast added to continued tensions over Iran and Nigeria to send prices higher.

Iran, the world's No.4 oil producer, said on Monday it would refuse inspections of its nuclear programme that the West is concerned could be linked to weapons, stirring renewed supply concerns from the Opec nation.

Exxon Mobil said on Tuesday it had returned its oil output in Nigeria to normal operating levels after an eight-day strike that shut down almost 800,000 barrel per day (bpd) of output in Africa's largest oil producer.

Niger Delta rebels promised on Tuesday to halt attacks on the oil industry if the Nigerian government would allow former US President Jimmy Carter to act as a mediator.

Capping further price rises, the dollar edged up against the yen on Wednesday as gains in global stocks prompted some investors to wade back into riskier carry trades. (Reuters)

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