NEW YORK (AFP) — Oil struck new highs above 133 dollars a barrel Wednesday after the US government reported unexpected declines in crude and gasoline stocks in a market pressured by rising Chinese demand.
New York's main oil futures contract, light sweet crude for July delivery, crossed 130 dollars for the first time then hours later raced to a record high of 133.82 dollars after the worrying US energy stockpiles report.
The benchmark futures contract closed a whopping 4.10 dollars higher at a record 133.17 dollars.
In London, Brent North Sea crude for July delivery settled at a record 132.70 dollars a barrel, a gain of 4.86 dollars. Brent hit a record intraday high of 133.34 dollars.
An already rallying oil market was galvanized by the US Department of Energy's weekly snapshot of energy inventories, which unexpectedly showed declines.
The DoE report Wednesday showed US crude oil stocks fell in the week ended May 16, by 5.4 million barrels to 320.4 million barrels. Most analysts' had expected a build of 300,000.
Gasoline inventories dropped by 800,000 barrels, to 209.4 million, confounding expectations of a gain of 250,000 barrels.
The gasoline news was particularly market-sensitive, coming days ahead of the US summer-holiday driving season that kicks off this weekend for the Memorial Day holiday Monday.
Americans have already begun buying less gasoline as prices at the pump hit new highs. The change in driving habits is raising concerns about a slowdown in consumer spending, the main engine of the world's biggest economy.
The US oil inventory data "is going to put more pressure on the already record-high prices of crude oil futures," IFR analysts said in a note to clients.
The rapid surge in oil prices came as the US Federal Reserve slashed its 2008 growth forecast for the US economy, the world's biggest oil consumer .
The Fed on Wednesday slashed its 2008 economic growth forecasts to a range of 0.3 to 1.2 percent, from its prior forecast of 1.3 to 2.0 percent in January. The central bank cited higher oil prices as a key factor weighing on momentum.
Crude futures have soared by a third in value since the start of 2008, when they breached 100 dollars for the first time.
Oil prices are also surging because of a weak dollar, which makes dollar-priced commodities cheaper for buyers using other currencies.
Analysts noted that a need for diesel-fueled power generation in earthquake-affected areas of China was boosting demand for the fuel.
"Fundamentally the crude prices are being supported by concerns over gasoline supplies ahead of the US driving season and on increased demand for diesel from China as they look to boost supplies ahead of the Olympics and after last week's earthquake," said Sucden analyst Nimit Khamar.
On the supply side, OPEC head Abdalla Salem El-Badri said Wednesday he was worried about volatility in the oil market.
"The secretary general expressed concern about the volatility that has characterized the market in recent times," the Vienna-based cartel said in a statement from Caracas, where El-Badri met Venezuelan President Hugo Chavez as part of a week-long working visit to OPEC members Venezuela and Ecuador.
"OPEC will continue to strive to bring stability to the oil market," the statement said.
OPEC has insisted that the market is well supplied and that record prices reflect speculative investment activity rather than underlying supply and demand conditions.
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