UPDATE 8-Oil rises past $127, OPEC says no need for hike

                                
 (Updates throughout, changes dateline from LONDON)
                                
 By Matthew Robinson
                                
 NEW YORK, May 19 (Reuters) - Oil rose past $127 a barrel on
Monday after OPEC's president insisted the producer group would
not increase output at its next meeting in September.
                                
  The U.S. light crude contract for June delivery <CLc1>,
which expires on Tuesday, settled up 76 cents at $127.05 a
barrel, near the record peak $127.82 reached on Friday. London
Brent crude <LCOc1> gained 7 cents to settle at $125.06 a
barrel.
                                
 "(The market) is still in bull mode technically, leading to
additional upside follow-through," said Tom Bentz, analyst at
BNP Paribas Commodity Futures Inc.
                                
 Crude's recent highs capped a commodities rally that has
sent oil prices up sixfold since 2002 on surging demand from
emerging economies, prompting consumer nations struggling with
rising fuel costs to ask OPEC to increase output.
                                
 OPEC President Chakib Khelil on Monday reiterated recent
comments from the cartel that despite record prices, oil
markets were well supplied, however, and blamed high prices on
speculation, a weak dollar and geopolitical problems.
                                
 "As for OPEC, indications shows that there is no shortage
(of supply)," Khelil he said, adding the group would not meet
before its next scheduled gathering in September and that
output would not likely be increased then.
                                
 The gains came despite comments from Saudi Oil Minister Ali
al-Naimi on Friday that the world's top exporter had boosted
oil output by 300,000 barrels per day to meet demand and
compensate for other producers' lower output. [ID:nN16383084]
                                
 "All in all, there is little indication that we are on the
verge of a major price breakdown," said Edward Meir, analyst at
broker MF Global.
                                
 U.S. President George W. Bush said on Saturday he was
pleased with the Saudi increase, but added was not enough to
solve problems in the United States, which has been stung by
the global credit crunch and high energy costs.
                                
 On Monday, the Saudi state news agency quoted Naimi as
saying that the current level of oil output was fulfilling
market demand. [ID:nL19688026]
                                
 Other OPEC ministers agreed.
                                
 "There is more oil in the market than consumers want," said
Iraqi oil minister Hussain al-Shahristani, adding the OPEC
nation planned to boost total oil exports to 2.3 million
barrels per day from 2.0 million bpd by the end of the year.
[ID:nL19715680]
                                
 Diesel has taken center stage in the world energy crunch as
tight power supplies in China, South Africa, South America 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 last week's earthquake disrupted gas
supplies to major cities and as companies built stockpiles
ahead of the summer Olympics.
                                
 Investment bank Lehman Brothers warned that record-breaking
commodities prices that were drawing in hundreds of billions of
dollars in new investments threaten to create an asset bubble.
[ID:nSYD305714]
 (Reporting by Matthew Robinson in New York, Jane Merriman in
London; Fayen Wong in Perth; Editing by Marguerita Choy)