Crude oil climbs to new intraday record of $70.88

LONDON -- Oil prices hit a new intraday high of $70.88 a barrel Tuesday amid international tension over Iran's nuclear program and worries about supply disruptions in Nigeria.

Light, sweet crude for May delivery surpassed the previous record of $70.85 a barrel in Asian electronic trading on the New York Mercantile Exchange, before easing back to $70.75. That's up 35 cents from Monday, when the contract settled at $70.40 a barrel, a record close.

In London, Brent crude for June delivery at the ICE Futures exchange also hit an all-time high of $72.20 a barrel, before easing back to $71.51 -- a 5 cent increase on Monday's close.

"We have broken new ground today," said Victor Shum, energy analyst with Purvin & Gertz in Singapore. "The market sentiment is bullish, with yesterday's record closing, momentum has been built up to cause a wave of buying."

The previous intraday high was set Aug. 30, when Hurricane Katrina lashed at the U.S. Gulf Coast and wreaked havoc on the region's oil industry.

Analysts said oil prices were likely to climb further as long as geopolitical risks in Iran and Nigeria posed threats to supply at a time when global demand remains strong and supplies remain tight.

Crude oil production is only barely keeping up with rising global demand, leaving a slim margin for error if there is a prolonged supply interruption, experts say.

Traders are anxious that U.S.-led efforts to stop Iran, OPEC's second-largest member, from pursuing a suspected nuclear weapons program would lead to a disruption in Persian Gulf supplies.

ABN Amro broker Lee Fader said the trigger for the latest rally was "heightened fear about military action" against Iran.

"If somehow this got resolved diplomatically that would definitely take a few dollars off," Fader said.

And in Nigeria, militant attacks have led to the stoppage of more than 25 percent of the country's crude oil production.

Also underpinning a sustained oil price rise is booming demand for oil in emerging economies such as China and India at a time when supplies are becoming tighter and the expectation of strong demand for gasoline over summer in the United States, the world's largest energy consumer.

"The market sentiment now is much more nervous," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. "Things haven't changed so much but as we approach the summer driving season we'll need more crude to make gasoline and we know also that U.S. gasoline production has its limitations because of the tight refining capacity."

U.S. gasoline inventories are expected to have slipped below the psychologically important 200-million-barrel mark in the week to April 14, according to a Dow Jones Newswires survey of 10 analysts. The data will be released Wednesday.

Gasoline futures Tuesday fell 0.6 cent to 2.1725 a gallon while heating oil prices gained 0.6 cent to $2.0223 a gallon. Natural gas futures rose 6.2 cents to $7.639 per 1,000 cubic feet.