Oil near $120 as Grangemouth strike bites

Oil neared $120 a barrel on Monday amid supply concerns following the start of a strike at the Grangemouth refinery in Scotland and further violence in Nigeria.

Nymex June West Texas Intermediate hit a record $119.93 a barrel before easing back to trade $1 higher at $119.52.

ICE June Brent touched a session high of $117.51 a barrel, just short of the peak $117.56 reached on Friday, before slipping back to trade 32 cents higher at $116.66 a barrel.

A two day strike at the Grangemouth refinery in Scotland will cause significant disruption to oil output from the UK sector of the North Sea with the closure of the 700,000 barrels a day Forties crude pipeline.

The union at Grangemouth has refused to ensure enough power, water and steam are supplied to maintain the operation of BP’s adjacent Kinneil plant, which processes crude oil from the North Sea fields.

However, the British government has insisted that the UK is “nowhere near” having to impose emergency powers to restrict fuel supplies to essential users.

In Nigeria this weekend, there was further violence involving militants in the Niger Delta which led to the deaths of five policemen. Tensions in Nigeria are running high after attacks on pipelines by militants and almost one-quarter of the country’s oil output is currently shut.

Geopolitical tensions between Washington and Tehran are also high after a US military vessel fired on an Iranian boat in the Gulf which caused oil prices to spike by more than $3 on Friday.

A rise in oil prices to $200 a barrel has not been ruled out by Chakib Khelil, president of Opec, according to press reports. Mr Khelil said that oil supplies were adequate but blamed the rise in oil prices on the slide in the dollar.

Gold trade at $892 a troy ounce, slightly firmer than New York’s late quote of $886.90 on Friday. Traders said they expected gold to remain rangebound ahead of this week’s meeting on the Federal Reserve. The Fed is expected to deliver a quarter point cut in US interest rates but the short-term outlook for the dollar could be affected if policymakers signal a pause in monetary easing.