Oil Closes at Another Record, Above $127
Nymex-traded oil finished Monday at yet another record high, hitting $127.05, after a seesaw trading session that saw crude prices hit alternately by profit-taking and supply concerns.
The U.S. light crude contract for June delivery , which expires on Tuesday, finished at $127.05 after hitting a record intraday peak of $127.82 on Friday.
London Brent crude fell 50 cents at $124.49 a barrel.
"We're probably down on profit-taking here, after recent highs and as the June crude contract expires tomorrow," said Amanda Kurzendoerfer, commodities analyst at Summit Energy Services Inc in Louisville, Kentucky.
OPEC President Chakib Khelil reiterated recent comments from the cartel that despite record prices, oil markets were well supplied and blamed high prices on speculation, a weak dollar and geopolitical problems.
"As for OPEC, indications shows that there is no shortage (of supply)," he said in Algiers.
Khelil said OPEC would not meet before its next scheduled gathering in September and that this meeting was unlikely to result in an output increase.
"All in all, there is little indication that we are on the verge of a major price breakdown," said Edward Meir, analyst at broker MF Global. He said a production increase from top exporter Saudi Arabia, revealed on Friday, was only "token" in terms of extra production.
Saudi Arabia has boosted oil output by 300,000 barrels per day to meet demand and compensate for other producers' lower output, Saudi Oil Minister Ali al-Naimi said on Friday.
On Monday, the Saudi state news agency quoted Naimi as saying that the current level of oil output was fulfilling market demand.
U.S. President George W. Bush said on Saturday he was pleased with the Saudi move, but it was not enough to solve problems in the United States, which has been stung by the global credit crunch and high energy costs.
Oil prices have risen sixfold since 2002 and doubled since last year as rising demand from China and other developing nations has stretched spare production capacity.
Qatar oil minister Abdullah al-Attiyah also insisted there was no need to boost oil supplies to global markets. "The market doesn't need more oil," he said, pointing to a cut in forecast oil demand growth by the International Energy Agency.
"There is more oil in the market than consumers want," said Iraqi oil minister Hussain al-Shahristani, adding the OPEC nation planned to boost total oil exports to 2.3 million barrels per day from 2.0 million bpd by the end of the year.
Diesel has taken center stage in the world energy crunch as tight power supplies in China, South Africa, South America 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 last week's earthquake disrupted gas supplies to major cities and as companies built stockpiles ahead of the summer Olympics.
Investment bank Lehman Brothers warned that record-breaking commodities prices that were drawing in hundreds of billions of dollars in new investments threaten to create an asset bubble.