Crude oil prices once again set both intraday and Nymex closing record highs Tuesday, driving toward $130 a barrel mid-day and finishing above $129 amid deepening worries over tight global stockpiles.
U.S. light, sweet crude futures closed at $129.07 a barrel on the Nymex. London Brent crude also rose.
The June contract for light, sweet crude traded as high as $129.60 on the New York Mercantile Exchange before easing back. The imminent expiration of that contract, which was ending with the close of Tuesday's trading, created additional volatility in the market.
"I keep making projections, and they keep turning out to be too low, especially in the crude market," said Darin Newsom, senior analyst at market analysis provider DTN. "We're already pushing up against $130. If we clear that, there's no reason to believe crude oil can't get to $140."
At filling stations across the country, the national average price for a gallon of regular gasoline approached $4, touching $3.80 for the first time.
Billionaire investor T. Boone Pickens said he expects oil to hit $150 a barrelthis year. Investment bank Goldman Sachs has said crude could extend its dramatic rally to $200 a barrel by 2010.
"There's a feeling that some of these forecasts of $150 oil might be right, so why not buy it now rather than later?" said Peter Beutel, president of Cameron Hanover.
Oil prices have risen sixfold since 2002 amid surging demand in China and other developing economies.
OPEC members have repeatedly rebuffed calls for more supplies from consumer nations hard-hit by the inflation in fuel costs, saying the rally is due to rampant speculation and not to any supply shortage.
OPEC kingpin Saudi Arabia said last week it would boost output by 300,000 barrels per day to make up for production outages in other OPEC nations, but added that a real boost to overall supply from the cartel is not needed.
Energy analysts say an OPEC decision to raise output would help ease the rally which has been fueled by resilient world energy demand even as the United States slows.
"Slackening U.S. demand is being offset by brisk offtake in Asian countries, and to a lesser extent in Europe, where the stronger euro is cushioning the price increases," said Edward Meir at MF Global.
Tight supplies have come under increasing strain following last week's earthquake in China, the world's second biggest oil consumer behind the United States, which disrupted natural gas supplies and increased demand for diesel to be used in electric generators.
A weekly report from the U.S. Energy Information Administration to be released Wednesday is expected to show increases in crude and refined products supplies, according to a Reuters poll of analysts.
Investment banks Societe Generale and Credit Suisse raised their oil price forecasts for 2008 Tuesday by $14 to $115 a barrel and by $29 to $120 a barrel, respectively.
Last week, Goldman Sachs predicted oil prices would average $141 in the second half of this year.
- Wire services contributed to this report.