Oil hits new record during the week

Oil prices touched a near record high above US$125 per barrel and was set for the biggest weekly gain in more than a year amid mounting concerns over supply disruptions ahead of the summer driving season in the US. Crude oil for June delivery climbed as high as US$125.98 a barrel in electronic trading on the New York Mercantile Exchange on Friday. The contract was last quoted at US$125.17 at 1:32 p.m. London time. Oil is up 7.6% this week, the biggest weekly gain since March 23, 2007. Oil prices have doubled from the same period a year ago.

A surge in heating oil futures following sharp declines in distillate inventories triggered heavy buying by investment funds. Also, refinery maintenance and production cutbacks have curbed diesel supplies of late. Militant strikes on Shell's Nigerian operations disrupted output from Africa's biggest oil producer. Still, OPEC said it doesn't need to increase supplies, even as its president warned prices may reach US$200 a barrel. The oil cartel said that there was no need to raise output as the considerable depreciation in the US dollar rather than limited supply is behind record prices.

The US government reported on May 7 that distillate fuel inventories and refinery operations fell last week. US distillate stockpiles, which include heating oil and diesel, declined 107,000 barrels to 105.7mn against forecasts for an 800,000-barrel rise, the Energy Department reported. Refineries in the US operated at 85% last week, down from 89% the year before, the data showed. Meanwhile, Goldman Sachs forecast that prices could hit US$200 a barrel in the next two years. The Wall Street major had famously and correctly predicted three years ago that oil would break through US$100.