Oil climbed to a life-time high above $130 a barrel on Wednesday, driven higher by a combination of long-term production worries and a near-term focus on tight fuel stocks.
A United States government report later on Wednesday was expected to show crude inventories rose for a fifth straight week.
Stocks of refined products were also forecast to have increased slightly, but the market is concerned distillates, which include heating oil and petrol, could run short.
US crude hit a peak of $130,47 before easing to $129,71 by 1.28pm GMT, up 73 cents. London Brent gained $1,16 to $129.
”This market refuses to lie down,” said Robert Laughlin of MF Global. ”There is fresh length coming into the market even at these lofty levels.”
Investors have been drawn in by a weak US currency, which has made dollar-denominated commodities relatively cheap for holders of other currencies.
The dollar slid to a one-month low against a basket of currencies on Wednesday as the euro was pushed higher by expectations of higher euro zone interest rates.
Speaking to Reuters during a visit to Venezuela, Opec secretary general Abdullah al-Badri said the soft dollar was one of the factors that could keep pushing oil higher.
The Organisation of the Petroleum Exporting Countries (Opec) has kept official policy unchanged, but its biggest producer Saudi Arabia has raised production and other members have overcome problems that had reduced supplies.
Tanker tracker Petrologistics said on Wednesday Opec’s oil output in May had risen by 700 000 barrels per day (bpd) compared with April.
Extra Opec crude has had little impact as the market has instead focused on short-term refinery problems, which are symptomatic of chronic underinvestment.
Diesel consumption has led the energy complex higher after last week’s earthquake in China increased the need for fuel to make up for disruption of other supplies.
The perception available oil will struggle to keep up with demand for the foreseeable future has led to a series of bullish price forecasts from investment banks and influential investors.
Billionaire T Boone Pickens said on Tuesday he expected oil to hit $150 a barrel this year after Goldman Sachs said earlier this month a barrel of crude could reach $200 by 2010.
Oil has risen from below $20 in early 2002. – Reuters