Oil rallies to new high near $128


Oil shot to a record high near $128 on Friday after Goldman Sachs, the most active investment bank in energy markets, raised sharply its forecast for prices.

U.S. crude hit a peak of $127.82 and was trading at 127.70, up $3.58, by 9:23 a.m. EDT. Brent was $3.53 higher at $126.16.

Goldman Sachs raised its forecast for average oil prices for the second half of the year to $141 a barrel from its previous forecast of $107.

Record high oil prices have helped to drive strength across the energy complex, especially for diesel, which has been driven by strong global demand.

Gas oil, which includes heating oil and diesel, was trading at $1,208 a tonne, just off a record hit earlier in the week.

Chinese demand for imported diesel is expected to rise sharply in June after this week's deadly earthquake disrupted gas supplies to major cities and as companies build stockpiles ahead of the summer Olympics.

The Organization of the Petroleum Exporting Countries (OPEC) has repeatedly said high oil prices have been driven by factors other than supply and demand.

Saudi Oil Minister Ali al-Naimi reiterated on Thursday prices had more to do with financial market volatility than fundamentals.

But U.S. President George W. Bush arrived on Friday in Saudi Arabia, the world's biggest oil exporter, where he renewed his appeal for more oil.

OPEC's smallest producer Ecuador said the group should consider raising output because record prices are hurting poor nations.


TradingEconomics.com, Bloomberg
5/16/2008 7:23:14 AM