Oil rises as Saudi Arabia nixes Bush plea
The OPEC nation rejects calls from the President to increase production as oil reaches a new record near $128 a barrel.
Last Updated: May 16, 2008: 12:06 PM EDT
NEW YORK (CNNMoney.com) -- Oil prices surged nearly $3, reaching a record high of almost $128 a barrel Friday as Saudi Arabia rejected President Bush's call to increase production.
According to the White House, Saudia Arabia doesn't see enough demand to increase production.
President Bush met with Saudi Arabia's King Abdullah on Friday as part of his Middle East tour to appeal for greater production to help quell crippling fuel prices.
Crude began to rise earlier in the day after traders foresaw a jump in diesel fuel use following the earthquake in China and Goldman Sachs revised its price outlook sharply higher.
Oil prices: U.S. crude for June delivery was up $2.96 a barrel to $127.08 on the New York Mercantile Exchange. Earlier, crude hit $127.82, topping the previous intraday record of $126.98 set Tuesday. Last Friday, oil closed at a record $125.96 a barrel.
"Everything the market looks at is bullish," Peter Beutel, an oil analyst at Cameron Hanover, wrote in a research note Friday.
Traders fear that the rebuilding after the 7.9 magnitude earthquake that rocked southwest China Monday - and killed more than 20,000 people with tens of thousands of others still missing - will lead to a sharp increase in diesel fuel use, the Associated Press reported.
Rocketing fuel: Diesel fuel has been in tight supply for the last several months following a cold winter in the Northern Hemisphere, and as the popularity of diesel cars grows in Europe and the developing world.
With diesel prices outpacing gasoline, refiners in the United States have been ramping up production of diesel and sending it abroad. That has displaced some domestic gasoline production, helping push gas prices higher.
The price of diesel fuel hit a new record high Friday of $4.482 a gallon, according to a daily survey from AAA. Regular unleaded gasoline also reached a new record of $3.787 a gallon.
Goldman Sachs weighs in: Also contributing to Friday's oil price spike: analysts at the investment bank Goldman Sachs boosted their oil price predictions for the second half of the year from $107 to $141 a barrel.
"Supply constraints continue to push crude prices higher," Goldman analysts wrote in a research note Friday.
But the bank noted that despite the high prices, the global economy - and by implication, the demand for oil - continues to grow.
"The dire macroeconomic impact from the current oil shock has yet to materialize," the note said.
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