Oil stands firm after setting new record near $121 a barrel

Oil stood firm on Tuesday after setting a new record high of nearly $121 a barrel, the latest spurt in an advance that has seen prices double over the past 12 months.

Supply disruptions in Nigeria, where a strike and attacks by militants has hit production, has supported a market that is nervous about any threats to supply.

Tensions with Iran racheted higher when the world's fourth-biggest oil producer refused to accept intrusive inspections of its nuclear program that the West fears could be linked to weapons.

U.S. light crude for June delivery was up 7 cents at $120.04 a barrel, by 1155 GMT after earlier touching a record high of $120.93. London Brent crude was up 33 cents at $118.32 a barrel, after an earlier record of $119.07.

Gold was also strong, as oil's advance helped spur a rebound from a four-month low last week. But gold is still some way below a record of $1,030.80 an ounce reached on March 17.

"The downward move in oil last week now seems like only a correction", said Christopher Bellew, senior vice president at Bache Commodities. "The effect of the credit crisis in the United States is reducing people's disposable incomes and you'd expect this to have an impact on the oil price, but it's not having any impact". Demand from emerging markets such as India and China is more than compensating for the U.S. downturn, he said.

Goldman Sachs predicted oil could soar towards $150-$200 a barrel because of a lack of adequate supply growth. "The possibility of $150-$200 per barrel seems increasingly likely over the next 6-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty", the bank said.

The U.S. investment bank had predicted back in 2005 that oil was entering a "super-spike" period. Oil prices further into the future have also risen sharply, with prices out to 2016 above $110 a barrel.