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Oil over $126, new peak for 5th straight day

Reuters: Oil over $126, new peak for 5th straight day

Fri May 9, 2008 10:09am EDT

By Santosh Menon

 

LONDON (Reuters) – Oil prices leapt to a new peak of more than $126 a barrel on Friday, hitting a record for the fifth straight session, in a market given an additional spur by tight supplies of diesel.

U.S. crude for June delivery rose $1.87 to $125.56 by 9:35 a.m. EDT, off a record high of $126.20 a barrel. London Brent crude rose $2.81 to $125.65 per barrel.

“I’m not particularly surprised by the speed of the rise in crude. There are many market bulls hoping for prices to rise heading into the summer,” said Tetsu Emori, fund manager at Astmax Co Ltd in Tokyo.

Gas oil futures, the benchmark for European heating oil and diesel contract, surged to a new record high on Friday, driven by worries about tight global diesel supplies.

“Lingering geopolitical fears and high heating oil prices are helping the market, but the speed of the rise is too fast,” said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.

Gains in U.S. crude picked up momentum after distillate stocks in the United States, notably diesel, fell.

The U.S. government said on Wednesday domestic distillate stocks, which include heating oil and diesel, fell by 100,000 barrels last week, to 105.7 million barrels, against forecasts for an 800,000-barrel rise.

The tightness in distillates was also highlighted after Royal Dutch Shell looked set to shut its second-largest crude distillation unit and two secondary units at its Singapore plant next month for routine maintenance.

Strength in middle distillates has been aggravated by growing demand for transport fuel in Europe and power demand in emerging economies where shortages of alternate fuels have set off a boom in demand for diesel for use in electric generators.

Oil’s relentless rise has once again turned the spotlight on Organization of the Petroleum Exporting Countries (OPEC), which has for months resisted demands for more oil to try to tame prices.

On Friday, an OPEC source said the exporters’ group might consider whether to boost output before its next scheduled meeting should crude oil prices keep rising.

“If the price keeps going up, OPEC may consult on an increase in production before it meets in September. In my view, any increase would have to be more than 500,000 barrels per day to have an impact on the price,” the source told Reuters.

OPEC’s Secretary-general Abdullah al-Badri said on Thursday world oil markets have enough supply now, but OPEC was willing to pump more if needed to keep pace with demand.

(Additional reporting by Chikafumi Hodo in Tokyo; Editing by William Hardy)

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