Combined Factors Raise Crude Oil Price To Record $128

May 17, 2008 12:49 a.m. EST

New York, NY (AHN) - Crude oil futures surged to a new record Friday, closing to $128 a barrel over reports that Saudi Arabia will not increase production.

Prices were already on the rise after a report from Goldman Sachs showed that it is increasing its estmate for the second half of the year.

Crude oil futures surged to as much as $127.82 before retreating to $127.65 a barrel, which is $3.53, or 3 percent higher, after it closed above $124 a barrel on Thursday on the New York Mercantile Exchange.

Brent crude for July delivery was up $3.26 to $125.89 a barrel on London's ICE Futures Europe exchange.

During President Bush's meeting with Saudi Arabia's King Abdullah on Friday, the Saudi leader dismissed the possibility of raising oil production to help reduce record setting fuel prices.

The U.S. President visited the Arab nation as a part of his Middle East tour, hoping to convince Saudi Arabia to boost fuel production.

The rising prices in the oil market can also be attributed to a report by Goldman Sachs Group Inc. released on Friday.

"We can blame Goldman again," Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA in New York, told Bloomberg.

"In March 2005 they predicted that prices would rise dramatically, and they did. Prices jumped to the $125 level after another Goldman report less than two weeks ago. At this point nobody wants to bet against Goldman," Barakat said.

Goldman lifted projection of its New York crude-oil price estimate for the second half of this year by 32 percent to $141 a barrel from $107 a barrel, due to restricted supply of oil globally.

The report added that prices are likely to increase higher in 2009, staying close to $148 a barrel.

"Supply constraints continue to push crude prices higher," Goldman analysts wrote in a research note Friday, according to CNN Money.

Meanwhile, heating oil was increasing by 7 cents to $3.70 a gallon, followed by reformulated gasoline that was advancing by 7 cents to $3.24 a gallon.