Oil hits a new peak above 126 U.S. dollars a barrel and a senior analyst in
London says he doesn't expect it to fall any time soon.

UNIDENTIFIED LOCATION, KUWAIT (FILE) REUTERS -

 Oil hit a new peak above 126 U.S. dollars (USD) on Friday (May 9),
the fifth straight session of record gains in a market given an additional
spur by tight supplies of diesel.
    U.S. crude for June delivery rose 1.32 dollars to 125.01 by 1455 GMT,
off a record high of 126.20 dollars a barrel. London Brent crude rose 2.01
dollars to 124.85. 
    Gas oil futures, the benchmark for European heating oil and diesel
contract, also surged to a new record high on Friday, driven by worries about
tight global diesel supplies and many energy analysts don't expect prices to
retreat any time soon.
    Howard Wheeldon, senior strategist at BGC Partners in London, said on
Friday: "I don't think we will see the sort of collapse that we had after
the first and second major rises of oil back in the 1980s and '90s. That won't
happen. I think we will keep rising at a slower pace until we get to around
146, 150 dollars a barrel. That's a long way off. That may take about two
years to get there, but I do believe that that is the way the price of oil is
heading."
    Gains in U.S. crude picked up momentum after a fall in distillate
stocks in the United States, notably. 
    The U.S. government said on Wednesday (May 7) that domestic distillate
stocks, which include heating oil, fell by 100,000 barrels in the previous
week to 105.7 million barrels, against forecasts for an 800,000-barrel rise.

    The tightness in distillates was also highlighted after Royal Dutch
Shell looked set to shut its second-largest crude distillation unit and two
secondary facilities at its Singapore plant in June for routine maintenance.

    Strength in middle distillates has been aggravated by growing demand
for transport fuel in Europe and power demand in emerging economies, where
shortages of other fuels have set off a boom in demand for diesel for use in
electric generators.
    Oil's relentless rise has once again turned the spotlight on the
Organisation of the Petroleum Exporting Countries (OPEC), which has for months
resisted demands for more oil to try to tame prices and safeguard economic
growth.
    Wheeldon commented: "We've coped amazingly well over the last two
years, where we've seen the price of oil move from 50 dollars, up to the
current 124-plus. We've managed it. There is a different use of oil. Companies
have adapted, countries have adapted. But at some point we do tip over where
oil does become a serious deterrent to economic growth. I think we're probably
very close to that stage now."
    An OPEC source said on Friday that the exporters' group might consider
whether to boost output before its next scheduled meeting, if crude oil prices
keep rising.
    OPEC Secretary-General Abdullah al-Badri said on Thursday that world
markets have enough supply now, but the organisation is willing to pump more
if it is needed to keep pace with demand.