Oil futures rally to record high of $127.82 a barrel
Goldman Sachs raises oil price forecast by 32% to $141 a barrel
By Polya Lesova, MarketWatch
Last update: 9:52 a.m. EDT May 16, 2008
NEW YORK (MarketWatch) -- Crude-oil futures rallied to a fresh record high of $127.82 a barrel Friday, as bullish momentum returned to the market and Goldman Sachs raised its forecast for oil prices to $141 a barrel.
Crude oil for June delivery was up $3.47, or 2.8%, at $127.60 a barrel in early morning trading on the New York Mercantile Exchange.
Earlier Friday, crude soared to a record high of $127.82 a barrel. The June crude contract traded on the Nymex expires May 20.
Goldman Sachs raised its forecast Friday for the average price of West Texas Intermediate oil in the second half of 2008 by 32% to $141 a barrel from $107 a barrel.
"We believe that the market is not defying fundamentals but rather experiencing a structural repricing much like it did in 2004, searching for a new equilibrium against an uncertain long-term supply environment," the broker said.
Goldman said that long-term oil prices will need to continue to rise to bring trend oil demand growth in line with trend supply growth, which stands at around 1% a year. Long-dated prices will need to rise on average by 14% above current levels to $148 a barrel, Goldman said.
"We believe that the market is not defying fundamentals, but rather experiencing a structural repricing."
— Goldman Sachs
Also on the Nymex Friday, June reformulated gasoline rose 7 cents at $3.24 a gallon and June heating oil gained 8 cents at $3.71 a gallon.
June natural gas futures rose 14 cents at $11.54 per million British thermal units.
Energy trading has been very volatile in recent days. On Thursday, crude hit an intraday low of $120.90 a barrel, but then closed little changed at $124.12 a barrel.
June crude "finished only slightly lower on Thursday, but the session was extremely volatile, with the intraday band on June WTI [West Texas Intermediate crude] spanning a $6 trading range," said Edward Meir, an analyst at MF Global, in a research note.
The oil market hasn't had a lot of time to get used to triple-digit prices, let alone the idea that $100 a barrel just might be the new price floor and the concept that cheap oil is a thing of the past. See Commodities Corner.
Saudi Arabia, the world's largest oil producer, has topped its Organization of the Petroleum Exporting Countries output quotas for six straight months, flying in the face of the cartel's official position that it doesn't need to boost production despite record high oil prices. Read full story.
In its monthly report released Thursday, OPEC said Saudi Arabia produced 9 million barrels a day in April, down slightly from March. Still, its output again topped the country's 8.9 million barrel-quota, as it has for the prior five months.
Elsewhere on the commodity markets, gold futures rallied 2%, boosted by soaring oil prices. See Metals Stocks. End of Story