Oil price nears $124 amid potential supply disruption speculations
'Pakistan Times' Federal Bureau

LONDON (UK): Oil prices held near record levels Thursday after gains overnight to nearly 124 dollars as speculators dived into a market concerned about potential supply disruption, traders said.

New York's main oil futures contract, light sweet crude for June delivery, eased three cents to 123.50 dollars a barrel. On Wednesday, New York crude had struck a record high 123.93 dollars.

London's Brent crude contract hit a record high of 122.79 dollars in early trade Thursday before easing back to 122.40 dollars, up eight cents on Wednesday's close.

Sucden analyst Michael Davies said Thursday that for investors, "risks still remain and given recent comments from Goldman Sachs ... anything is possible in the oil market at the moment."

US investment bank Goldman Sachs this week forecast that prices could hit 200 dollars in the next two years. The bank had famously and correctly predicted three years ago that oil would break through 100 dollars -- which it did in January.

Oil prices have crashed through records every day this week, jumping by about seven dollars in total.

"Clearly the current spike in oil prices has been sharp and furious, and with little in the way of fresh impetus and lack of supporting (supply/demand) fundamentals a retracement must surely be on the cards," said Bank of Ireland analyst Paul Harris.

"That said, in current conditions it is difficult to call exactly when the bearish (negative) elements will prevail. More importantly, the key issue is how far that pullback will be, with oil prices below 100 dollars a barrel at this stage a dim and distant memory," Harris added.

Some economists fear that surging oil prices could crimp US economic growth and Wall Street tumbled on Wednesday after the latest spike.

America is the world's biggest oil importer but its economy has been pressured by a long-running housing market slump and a related credit squeeze.

Oil prices continued their gains Wednesday despite a weekly survey by the US government showing that the country's crude stocks rose by 5.7 million barrels to 325.6 million barrels for the week ended May 2.

Analysts said that while the inventory report showed an unexpectedly large crude gain, many market participants zeroed in on drawdowns in distillates, which include diesel and heating oil, and which provided the momentum for a strong close.

Traders said a combination of forces have pushed prices higher, including market speculators and a decision by the Organization of the Petroleum Exporting Countries cartel not to hike output quotas.

Prices have also been buoyed by ongoing violence in Nigeria, Africa's largest producer, where attacks have cut production by about a quarter over the past two years.●