Oil crosses $129 for first time, heads for $130

20 May, 2008, 2033 hrs IST, AGENCIES

VIENNA: Oil prices spiked a new trading high Tuesday, sweeping past $129 a barrel as supply concerns intensified the momentum buying that has lifted crude higher into record territory.

The June contract for light, sweet crude traded as high as $129.31 in electronic pre-opening trading on the New York Mercantile Exchange before settling back to $128.75, up $1.70 on the day.

This latest surge comes after OPEC's president was quoted as saying his organization won't increase its output before its next meeting in September.

The imminent expiration of the June contract is adding to the volatility. The contract will end at the close of trading Tuesday.

The contract reached a new closing high of $127.05 Monday after Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, was quoted by a government newspaper as saying OPEC won't increase its output during the US summer driving season, which begins this weekend. OPEC's next meeting is scheduled for Sept 9.

Concern about supply has recently become the primary driver of the market, replacing earlier worries about a weakening dollar, and not even Saudi Arabia's promise last week of an additional 300,000 barrels of crude a day could alleviate those new concerns.

Despite that pledge from the world's leading oil producer and the US move to temporarily stop filling government stockpiles, prices have shown no indication of stopping their record run.

Through Monday's close, the front-month contract has hit nine trading or closing records in 11 sessions. Analysts have said speculative buying has also contributed to oil's record high run.

In other news lifting prices, independent refiner Holly Corp. said a key unit at its New Mexico refinery was shut down for repairs, cutting estimated May gasoline production by as much as 756,000 gallons per day. The shutdown occurred while the fluid catalytic cracking unit was being brought back online from a previous shutdown May 7.

The refinery in Artesia, New Mexico, is Holly's largest. As oil prices reach new heights, so have gasoline and diesel costs.

``Average gasoline prices in the US rose for an eighth straight week and for the 15th time this year, up 1.8 per cent or 6.9 cents to a record $3.791 a gallon,'' noted Stephen Schork in his Schork Report. ``Gasoline at the pump is averaging 28.5 per cent above last year's pace.''

Drivers in some parts of the US are paying considerably more, however. Gas pump prices in parts of California have been stuck above $4 a gallon for weeks now.

In other Nymex trading, heating oil futures rose 0.14 cent to $3.7665 a gallon (3.8 liters) while gasoline prices rose 4.89 cents to $3.2855 a gallon. Natural gas futures rose 17.9 cents to $11.133 per 1,000 cubic feet.