Oil prices held above $118 this morning after reaching near the $120-a-barrel mark last night due to a weakening dollar, supply disruptions in Nigeria and fears that a refinery strike in Scotland could hit production in the North Sea.

The US crude contract for June briefly hit an all-time peak of $119.90 last night.

London Brent crude rose 5 cents to $116, after its previous contract expired at $115.95, after touching a record peak of $116.75.

Oil's strong rally in recent weeks has seen prices rise more than five-fold since 2002, as booming demand from emerging markets such as China coincided with long-term supply constraints.

China, the world's second largest consumer, further boosted the price of oil, after new government data showed that demand rose 8 percent in March from a year earlier, the quickest rate in 19 months as refiners boosted imports ahead of the Olympics.

"We are seeing no evidence of demand destruction even as prices keep rising," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

"OPEC is still not willing too pump more oil onto the market, and to add the situation, there is no significant production increase beyond OPEC," he added.

A softer dollar, which fell to new lows against the euro yesterday, has also helped to boost dollar-denominated commodities such as oil and attracted speculative inflows from hedge funds.