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WEEKLY
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| Oil hits record, further spike forecast |
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Saturday, May 17, 2008
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, forecasted a continued spike in prices through the end of the year due to thin supplies.
The rally came as OPEC kingpin Saudi Arabia rebuffed an appeal from US President George W Bush for more oil supplies to ease pressure on the US economy, already hard hit by a housing slump and credit crunch. US crude gained $2.50 to $126.62 a barrel by 1600 GMT, after touching a peak of $127.82 earlier in the day.
London Brent rose $2.48 to $125.11. Oil prices have risen six folds since 2002 and doubled since last year, as rising demand from China and other developing nations outpaced new supply. 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. That’s causing oil to run up about $3 today,” said David Katz of Matrix Asset Advisors. Goldman earlier this month, predicted that oil prices could scale $200 within the next two years.
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 at MF Global.
The boom in diesel consumption added to the already robust demand from the European vehicle fleet, thinning inventories on both sides of the Atlantic. Adding support to oil’s rally, the Organisation of the Petroleum Exporting Countries (OPEC) has repeatedly said there is no need to add supply to the market.
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ISSN 1563-9479 
