Oil hits record near $130 as supply fears grow

NEW YORK Wed May 21, 2008 1:52am IST

A worker is seen filling up a taxi's fuel tank at a gas station in Taipei in this April 23, 2008 file photo. REUTERS/Nicky Loh/Files

A worker is seen filling up a taxi's fuel tank at a gas station in Taipei in this April 23, 2008 file photo.

Credit: Reuters/Nicky Loh/Files

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NEW YORK (Reuters) - Crude oil prices scaled a new peak near $130 a barrel on Tuesday amid deepening worries over tight global stockpiles and signals from OPEC that no additional supplies are forthcoming to ease the crunch.

Billionaire investor T. Boone Pickens said Tuesday he expected oil to hit $150 a barrel this year. The prediction came on the same day two investment banks raised their 2008 crude price forecasts and two weeks after Goldman Sachs said a barrel could fetch $200 by 2010.

"There's a feeling that some of these forecasts of $150 oil might be right," said Peter Beutel, president of Cameron Hanover. "So why not buy it now, rather than later?"

U.S. crude oil futures settled up $2.02 at $129.07 a barrel, after hitting a high of $129.60 during the session. London Brent crude rose $2.78 to $127.84 a barrel.

Oil prices have risen sixfold since 2002 as surging demand in China and other developing economies strained supplies and drew in a wave of investor interest.

Members of the Organization of the Petroleum Exporting Countries have repeatedly rebuffed calls for more supplies from consumer nations hard hit by the inflation in fuel costs, saying the rally is due to rampant speculation and not to any supply shortage.

On Tuesday, Venezuela Energy Minister Rafael Ramirez and OPEC Secretary General Abdullah al-Badri reiterated that they think oil markets are well supplied.

The U.S. House of Representatives approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies, but the White House threatened to veto the measure because it could spur "retaliatory action against American interests in those countries".

Energy analysts say an OPEC decision to raise output could help ease the price rally, which they say has been fueled largely by resilient world energy demand even as the United States economy slows.

"Slackening U.S. demand is being offset by brisk offtake in Asian countries, and to a lesser extent in Europe, where the stronger euro is cushioning the price increases," said Edward Meir of MF Global.

Last week's earthquake in China has further tightened up world fuel supplies by boosting demand for diesel to be used in electric generators.


Investment banks Societe Generale and Credit Suisse raised their oil price forecasts for 2008 Tuesday by $14 to $115 a barrel and by $29 to $120 a barrel, respectively.

Last week, Goldman Sachs predicted oil prices would average $141 in the second half of this year and added that crude prices for delivery far into the future would also likely rise sharply as oil companies have trouble accessing new reserves to feed demand growth.

"This is due to 'the revenge of the old political economy' (resource protectionism), which imposes significant policy constraints on the free flow of capital, labor and technology that are substantially limiting supply growth," Goldman said in a report.

U.S. crude oil prices for delivery in December 2016 settled up $8.40 on Tuesday at $138.38 a barrel.

A weekly report from the U.S. Energy Information Administration to be released Wednesday is expected to show increases in crude and refined products supplies, according to a Reuters poll of analysts.

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