(Adds details, settlement prices)
By Richard Valdmanis
NEW YORK, May 16 (Reuters) - Oil shot to a record high near
$128 a barrel on Friday as a bullish price forecast from
investment bank Goldman Sachs drowned out an offer of more
supply from OPEC kingpin Saudi Arabia.
U.S. crude <CLc1> settled up $2.17 at $126.29 a barrel
after touching a peak of $127.82 earlier in the day. London
Brent <LCOc1> rose $2.36 to $124.99.
Oil prices have risen six-fold since 2002 and doubled since
last year as rising demand from China and other developing
nations cinched spare production capacity, adding pressure on
the U.S. economy already hard hit by a housing slump.
Goldman Sachs, the most active investment bank in energy
markets, said Friday that oil prices will average $141 a barrel
in the second half of this year due to paper-thin inventories
-- a prediction that would require a rapid run-up in current
prices to come true.
"I would say the bigger story today is that Goldman upped
their target on average oil prices for the back half of the
year," said David Katz of Matrix Asset Advisors.
Goldman earlier this month predicted that oil prices could
scale $200 within the next two years.
Under pressure from consumer nations hard-hit by the rally,
OPEC kingpin Saudi Arabia said Friday it agreed to boost output
by 3.3 percent, or 300,000 barrels per day, to loosen up the
market and make up for declines in other OPEC nations.
The announcement came as U.S. President George W. Bush
visited Riyadh for the second time this year to appeal for more
oil to ease pressure on the U.S. economy already slowed by a
housing slump and credit crisis.
"In effect they are trying to help President Bush, but in
reality they are not increasing the OPEC total because they are
compensating for shortfalls," said Nauman Barakat, senior vice
president at Macquarie Futures USA.
OPEC's smallest producer, Ecuador, said on Friday that
members should consider raising output to stem the oil rally
because high prices are hurting the poor.
"I think OPEC has to deal with this issue, because this is
hitting all the poorest countries that are oil importers,"
Ecuador President Rafael Correa told Reuters in the Peruvian
capital of Lima.
The Organization of the Petroleum Exporting Countries
(OPEC) had previously rebuffed calls for more supply during
oil's recent climb.
Diesel has taken center stage in the world energy crunch as
tight power supplies in China, South Africa, Chile, Argentina
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 this week's deadly earthquake disrupted
gas supplies to major cities and as companies built stockpiles
ahead of the summer Olympics.
Weakness in the U.S. dollar encouraged oil's gains Friday,
analysts said.
(Additional reporting by Santosh Menon and Alex Lawler in
London, Felicia Loo in Singapore; Editing by Christian
Wiessner)
