Oil ends record week near 126 dollars

NEW YORK, May 9 (Xinhua) -- Crude futures continued its price rally and closed at an all-time high near 126 U.S. dollars a barrel Friday.

Light, sweet crude for June delivery hit 126.25 dollars a barrel on the New York Mercantile Exchange (NYMEX) before it settled at 125.96 dollars, trading up 2.27 dollars. In London, Brent crude futures for June delivery rose 2.56 dollars to settle at 125.40 dollars a barrel.

Crude rally

"Oil continued its spectacular rise today as it climbed over 126 dollars per barrel," said Wall Street Strategies' senior research analyst Conley Turner. "This latest move is being spurredon by a number of factors including emerging concerns that there may be a possible confrontation between the United States and Venezuela."

A report published by the Wall Street Journal Friday suggested closer ties between Venezuelan President Hugo Chaves and the rebels trying to overthrow Colombia's government.

"Any such confrontation will invariably cut exports from this important member of Organization of Petroleum Exportation Countries in an environment where supplies are already constrained," Turner pointed out.

"In addition, the decline in the value of the U.S. dollar against the euro and other foreign currencies is serving as a reason for the price of the commodity rising," he added.

The U.S. Dollar Index, a weighted measure against the euro, yen,pound and other major currencies, is down 11 percent in the past year.

On Thursday, European Central Bank's decision to leave euro interest rates unchanged sent oil price breaking 124 dollars a barrel.

For the week, crude futures, which have more than doubled within one year, rocket 8.3 percent on the NYMEX. The oil prices settled at 61.55 dollars per barrel on May 9, 2007.

Going higher?

The investment bank Goldman Sachs Monday predicted that the supply shortage will send oil price up to 200 dollars within two years.

However, the OPEC, which produce more than one third of world crude, denied shortage of oil supply and blamed the turmoil in equity market and a weaker dollar for recent price hike. The organization is not scheduled to meet until September.

Shokri Ghanem, Libya's senior oil official, who predicted that oil price will break 125 dollars a barrel this week, suggested Friday OPEC might increase its output if oil prices continued to rise. He also supported an earlier OPEC meeting.

"The rising demand for oil from emerging economies such as India and China is also serving as a supportive factor for the continued rise in the price of oil," said Turner.

"The current price spike is however somewhat worrisome in the near term and a severe pull back is a realistic possibility," Turner commented.

Any asset or class of assets experiencing such a rapid rise in price will invariably see a move that resembles a reversal to the mean, he said.

"Oil will continue to rise until it doesn't," Turner said. "Nonetheless, in the long run, oil prices are going higher than today."