High Oil Prices Hold Steady Amid Fears of Shortages

Oil held above $117 a barrel Tuesday, just shy of its all-time high, as geopolitical risks stoked fears about supply shortages at a time of strong Chinese demand for crude.

U.S. light crude for May delivery traded at $117.31 a barrel, down slightly from its peak of $117.83 on Monday. In trading Monday on the New York Mercantile Exchange, oil settled at $117.48 a barrel, up 79 cents. Oil prices have more than quadrupled in the last five years, and some analysts say oil will reach $125 a barrel this year.

The latest rise in energy prices was prompted by reports that a Nigerian rebel group had blown up pipelines in the Niger Delta. An attack on a pipeline last week forced Royal Dutch Shell to curtail exports by 169,000 barrels a day. Because there is little spare capacity worldwide, slight disruptions in oil production anywhere can raise prices.

"Again there are some concerns over supply disruptions in Nigeria," said David Moore, a commodities strategist at Commonwealth Bank of Australia.

Crude oil imports to China, the world’s second-largest user of oil, rose about 25 percent from a year ago to 4.07 million barrels per day in March, far above previous records, Chinese customs data showed Tuesday.

Provoking supply worries, the Grangemouth refinery in Scotland has begun shutting down before a two-day strike is due to start Sunday. Some North Sea oil and natural gas output could be cut if the union goes on strike.

But officials at the Organization of Petroleum Exporting Countries reaffirmed its view that the market had enough oil and that it would not increase output to help lower prices despite calls for more oil from some consumer nations.

The long rise of energy prices is showing little evidence of giving way to U.S. recession fears.

Investors have been buying commodities like oil to hedge against inflationary pressures. The falling value of the dollar has fed the rise in oil prices, which are denominated in dollars. A weak dollar reduces the value of oil exports for producers, leading them to seek higher prices to make up for that loss. The dollar is near a low against the euro.

"If the dollar continues its slide, I can see prices go up," the Iranian oil minister, Gholam Hossein Nozari, said in Rome on Monday.

Oil use is expected to grow 1.5 percent this year. But given signs of slowing economic growth worldwide, the International Energy Agency, an advisory group to industrial nations, reduced its forecast this month for demand by 300,000 barrels a day.

In Rome on Tuesday, OPEC’s secretary general, Abdalla Salem el- Badri, said there were plans to increase oil production target capacity by five million barrels a day by 2012. In separate comments on the sidelines of the final day of an energy forum, he said OPEC members were planning to spend $160 billion over the next four years to increase production capacity.

Badri said that issues of supply and demand were being discussed at the forum but that he did not expect any agreement on whether prices are too high or too low.