Oil rises above $129, near record high

Oil held above $129 a barrel on Wednesday, within sight of the previous session’s record high, supported by a weak United States dollar and concern about supplies.

Attention will shift later to a US government report expected to show that crude inventories rose for a fifth straight time last week while petrol and distillates supplies also increased.

US crude for July was up 44 cents at $129,42 by 8.25am GMT. London Brent gained 51 cents to $128,35 and earlier in the session reached a record high of $128,53.

”A weak dollar boosts buying of commodities as a counterhedge. There is growing demand in China but supplies remain tight,” said Mark Pervan, a senior commodities analyst at Australia & New Zealand Bank.

On Tuesday the June US contract expired after hitting a record high of $129,60.

The dollar slid to a one-month low against a basket of currencies on Wednesday on expectations of higher euro zone interest rates.

Despite record oil prices, the Organisation of the Petroleum Exporting Countries (Opec) has repeatedly rebuffed calls for more supply from industrialised nations, instead blaming the rally on speculation.

Speaking to Reuters during a visit to Venezuela, Opec secretary general Abdullah al-Badri said oil could keep rising due to factors such as the weakening dollar.

An Opec decision to raise output could help ease the price rally, which energy analysts say has been fuelled largely by resilient world energy demand even as the United States economy slows.

Robust diesel imports into China, the world’s second-biggest energy user, have fuelled prices around the globe. European gas oil’s premium to London Brent crude hit a peak of $40 last week, boosting margins for refineries.

”If there is an upside driver in energy these days, it is the diesel markets,” MF Global said in a report. ”Sentiment here continues to remain very bullish.”

Oil has risen from below $20 in early 2002 as surging demand in China and other developing economies strained supply and oil’s appeal grew to financial investors. Analysts say the rally has further to run.

Billionaire investor T Boone Pickens said on Tuesday he expected oil to hit $150 a barrel this year. Goldman Sachs said earlier this month a barrel of crude could reach $200 by 2010. – Reuters

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