New York: Oil shot to a record high near $128 a barrel on Friday after Goldman Sachs, the most active investment bank in energy markets, forecast a continued spike in prices through the end of the year due to thin supplies.
Under pressure from consumer nations hard-hit by the rally, OPEC kingpin Saudi Arabia said Friday it agreed to boost output by 300,000 barrels per day to loosen up the market and make up for declines in other OPEC nations.
The announcement came as US President George W. Bush visited Riyadh for the second time this year to appeal for more supply to ease pressure on the US economy already slowed by a housing slump and credit crisis. US crude gained $1.87 to $125.99 a barrel by 1700 GMT after touching a peak of $127.82 earlier in the day. London Brent rose $2.07 to $124.70.
Oil prices have risen six-fold since 2002 and doubled since last year as rising demand from China and other developing nations cinched spare production capacity. Goldman Sachs raised its forecast for average oil prices for the second half of 2008 to $141 a barrel from $107 because of tight inventories -- a prediction that would require a rapid run-up in current prices to come true.
"I would say the bigger story today is that Goldman upped their target on average oil prices for the back half of the year," said David Katz of Matrix Asset Advisors. Goldman earlier this month predicted that oil prices could scale $200 within the next two years. OPEC's smallest producer, Ecuador, said on Friday that members should consider raising output because record prices are hurting the poor. "I think OPEC has to deal with this issue, because this is hitting all the poorest countries that are oil importers," Ecuador's president, Rafael Correa, told Reuters in the Peruvian capital, Lima.
The Organization of the Petroleum Exporting Countries (OPEC) had previously rebuffed calls for more supply during oil's recent climb. DIESEL CRUNCH Diesel has taken center stage in the world energy crunch as tight power supplies in China, South Africa, Chile, Argentina, and parts of the Middle East triggered a boom in demand for middle distillates for electric generators. Chinese demand for imported diesel is expected to rise even further in June after this week's deadly earthquake disrupted gas supplies to major cities and as companies built stockpiles ahead of the summer Olympics.
"People are looking at diesel. The situation is worse since the earthquake on Monday in China," said Robert Laughlin, oil analyst at MF Global. The boom in diesel consumption added to already-robust demand from the European vehicle fleet, thinning inventories on both sides of the Atlantic. Weakness in the US dollar encouraged oil's gains Friday, analysts said.
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