Oil settles just shy of $120

Another record high for gas

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NEW YORK (CNNMoney.com) -- Oil surged more than $3 to a record $119.97 per barrel on Monday as a weaker dollar pulled in buyers and international conflicts threatened to disrupt supply.

In Iraq, Kurdish rebels threatened suicide attacks against U.S. interests in retaliation for sharing intelligence with Turkey. Turkish forces bombed several rebel bases in Iraq on Friday. Traders fear that fighting in the country could reduce oil exports.

Royal Dutch Shell PLC (RDS.A) said militants struck a facility owned by one of the company's joint ventures in Nigeria, a major U.S. supplier. Shell said some production has been shut down.

Adding to the global tension was Iran, OPEC's second largest supplier, whose Supreme Leader Ayatollah Ali Khamenei refused to give in to international pressure for his nation to give up its nuclear program in a speech on Sunday.

Also pushing oil prices higher was a weakened dollar; the recent rally ended after the Federal Reserve cut its key interest rate to 2% last week.

The value of the 15-nation euro rose to $1.5456, up from $1.5418 on Friday. Commodities such as oil are sometimes purchased as a hedge against inflation.

"With the dollar showing some weakness," and the Nigerian attacks, a lot of people are buying oil, said Phil Flynn, senior analyst at Alaron Trading.

Light, sweet crude for June delivery rose $3.65 a barrel to close at a record high of $119.97 on the New York Mercantile Exchange, but not before hitting a trading high of $120.36 a barrel.

Crude prices affect the price of regular gasoline, but with some lag.

The price of regular gasoline at home slipped 1.1 cents to $3.611 a gallon, according to a daily survey from AAA and the Oil Price Information Service. Prices hit a new record of $3.623 last Thursday.

Diesel prices also fell slightly to $4.239 a gallon. The heavy fuel used by most trucks, ships and freight trains affects shipping costs, which have contributed to the higher food prices.

Oil may not be able to sustain its high $120 level, according to one analyst.

"If we can't get a significant momentum over $120, eventually the market is going back to $110-$115," said Stephen Schork, publisher of industry newsletter the Schork Report. However, he warns that if oil's momentum pushes prices higher, it will probably trade in a range between $125 and $130.

Also trading on the Nymex Monday, gasoline futures rose 7.7 cents to $3.0431 a gallon, and heating oil rose 9.7 cents to $3.3158 a gallon. Natural gas 36 cents to $11.139 per 1,000 cubic feet.