Gold up nearly 1% but fears remain

London: Oil climbed above $119 a barrel yesterday after a workers strike cut production in Nigeria and tensions rose between the US and Iran.

US crude for June delivery jumped as high as $119.50 on the news before retreating to trade up $2.70 at $118.76 a barrel on the New York Mercantile Exchange.

In London, Brent crude futures rose $2.80 to $117.14 a barrel on the ICE Futures exchange, after hitting a new record of $117.51 earlier in the session.

A ship contracted by the US Military Sealift Command fired at least one shot toward an Iranian boat, a US defence official said. No further details were available. The US in January said Iranian boats threatened its warships along a vital route for crude oil shipments.

Meanwhile, the European single currency fell further yesterday from last week's record dollar high as dealers continued to focus on soft economic data in the euro zone, analysts said.

In early European trading, the euro sank to $1.5589, from $1.5685 in New York late on Thursday. It had hit a historic peak of $1.6019 on Tuesday.

Against the Japanese currency on Friday, the dollar rose to 104.63 yen from 104.22. The pound was at $1.9763.

Oil also found support from a significant cut in Nigerian production due to a workers strike and rebel attacks.

"You have everything coming together and that's lifting us off again," said Tom Bentz, analyst for BNP Paribas Commodity Futures in New York.

A strike by Nigerian workers at ExxonMobil has forced the company to shut down some 200,000 barrels per day of crude oil output, a senior union official said.

Exxon has surpassed Royal Dutch Shell as the top foreign oil producer in Nigeria after Shell was struck by repeated militant attacks on its facilities.

Nigerian rebels said yesterday they had sabotaged an oil pipeline in the Niger Delta belonging to Royal Dutch Shell late on Thursday. "Our candid advice to the oil majors is that they should not waste their time repairing any lines as we will continue to sabotage them," the Movement for the Emancipation of the Niger Delta (MEND) said.

Shell confirmed the attack and said it was trying to assess the extent of the damage to the pipeline.

Shell has been forced to shut 169,000 bpd of Bonny Light crude oil output after a pipeline attack there a week ago.

In the North Sea, BP said it had begun shutting down UK's Forties oil pipeline in preparation for a planned strike at a major Scottish refinery this weekend.

The 700,000 barrel-a-day Forties pipeline carries about half of Britain's North Sea oil production.

In London yesterday, currency speculators drove the euro lower in response to a much weaker than expected German business survey on Thursday.

The dollar headed for its best monthly performance in 2-1/2 years against a basket of major currencies, boosted by a growing view the Federal Reserve may stop cutting interest rates.

Spotlight on ECB

ECB President Jean-Claude Trichet said on Thursday that the euro's surge last week to record levels "could hurt the European economy."

The soft data rekindled talk of a possible interest rate cut by the ECB, but analysts said that stubborn inflation would make it hard for the ECB to loosen monetary policy. The euro's gains were capped by speculation that the Fed might soon halt its series of interest rate cuts, possibly after one more 25 basis point reduction next week.

"Given the recent stable movement on the global financial markets, receding concerns about the credit crunch and surging commodity prices, there is an emerging view that the Federal Reserve Board may end the rate-cutting cycle after one more rate cut," Tokai Tokyo Securities chief economist Mitsuru Saito said.

Confidence has been recovering in stock markets recently as investors hope for a rebound in US economic growth later this year despite massive losses by major US banks.