Oil hits new record high near $128/bbl in New York

LONDON (Thomson Financial) - Oil soared to a record high near $128 a barrel
in New York on Friday, with tight global distillate markets, long-term supply
fears and dollar weakness spurring the market higher.
At 2.24 p.m., New York-traded West Texas Intermediate crude for June
delivery was up $3.50 at $127.62 a barrel, having earlier set an all-time high
of $127.82 a barrel.
In London, Brent crude for July delivery was up $3.51 at $126.14.
Distillate imports by Petrochina are expected to rise by a third to 400,000
tonnes in June, as the Chinese oil giant moves to ensure energy supplies after
Monday's deadly 7.9-magnitude earthquake in Sichuan province cut its natural
gas-generated power capacity.
Global distillate stocks -- which include heating oil and diesel -- are also
being stretched by heightened buying in Europe, with a spate of refinery outages
hampering supplies.
"Traders are refocusing on the distillate market which remains pretty
tight," said Bank of Ireland analyst Paul Harris.
A softer tone in the U.S. dollar has also fuelled buying, as commodities
priced in the greenback become cheaper for holders of alternative currencies.
The dollar has weakened against the euro after data on Thursday showed U.S.
industrial production fell by 0.7 percent in April, while first quarter GDP in
Europe increased by 0.7 percent.
Bullish predictions from Goldman Sachs, the most active investment bank in
energy markets, have also encouraged buying. The investment bank on Friday
raised its average oil price forecast for the second half of 2008 to $141 a
barrel from $107 a barrel, arguing that global GDP growth is outstripping
production increases, forcing long-dated future contracts higher.
"To balance trend global GDP growth of 3.8 percent against trend supply
growth of 1.0 percent, prices need to rise on average 14 percent from here in
the second half of 2008," the bank said in a research note, adding that
'resource protectionism' by many oil producing countries was curbing supply
growth. ...........

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