Oil rocketed to a new high near 128 dollars

NEW YORK - Oil rocketed to a new high near 128 dollars a barrel in New York Friday after a key investment bank hiked its forecast, adding to buying fervor.

Goldman Sachs, the most active investment bank in energy markets, predicted a jump to 141 dollars for the second half of the year for crude.

After peaking at a record 127.98 dollars, New York's main oil futures contract, light sweet crude for June delivery, closed at an all-time high of 126.29 dollars, up 2.17 dollars from Thursday's close.

In London, Brent crude contract for June spiked to an all-time high of 126.34 dollars, before settling at 124.99, up 2.36 dollars.

Goldman Sachs, which was one of the first in the market to call for crude prices to hit 100 dollars a barrel back in 2005, argued that global gross domestic product (GDP) growth will continue to outstrip oil production increases, pushing prices higher.

It hiked its forecast to 141 dollars a barrel, from 107 dollars.

"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.

Earlier this month, a Goldman Sachs analyst predicted prices could hit between 150 and 200 dollars a barrel over the next two years.

Oil prices also were underpinned Friday by speculation about a rise in oil imports to China, the second-largest energy consumer after the United States.

"Indications are PetroChina will boost imports because of the powerful earthquake in Sichuan. Supplies in the region are very tight, pipelines running there are operating at reduced capacity, and backup generators are needed to help make up for the loss of some power generation capacity," said Eric Wittenauer at Wachovia Securities.

The market shrugged off the announcement that the US is suspending shipments to its strategic oil reserve for the second half of the year after Congress passed a bill calling for the halt in a bid to ease prices. The move affects up to 13 million barrels of crude oil.

Meanwhile, US President George W. Bush, visiting Saudi Arabia, pressed the oil-rich kingdom to increase output to help cool runaway prices that are weighing on US and other countries' economic growth.

Saudi Arabia's oil minister, Ali al-Nuaimi, told reporters the kingdom has increased oil production by 300,000 barrels per day from May 10 in response to orders from customers, mostly from the United States, and will pump 9.45 million barrels per day in June.

Saudi Arabia is the biggest producer in the 13-nation Organization of the Petroleum Exporting Countries, which pumps 40 percent of the world's oil.

Oil prices have surged some 25 percent since the start of 2008, when they crossed 100 dollars a barrel for the first time.

"The global oil market remains indeed structurally tight," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

"Even though demand growth is showing some weakness, supply growth is also not there. OPEC continues to restrain supply and production in non-OPEC states are not expected to be strong."

On Thursday, OPEC trimmed its 2008 estimate of world oil demand growth, citing higher prices and slower economic momentum in major industrialized countries including the United States.

Global oil demand was projected to grow by 1.35 percent in 2008, compared with a previous estimate of 1.4 percent, OPEC said in a monthly survey.