Oil holds above $129 a barrel on supply worries

Oil prices held steady above $129 a barrel Wednesday in Asia after hitting another record in the previous session as supply concerns mounted and traders poured in for last-minute buying as the June contract expired.

Light, sweet crude for July delivery was up 15 cents at $129.13 a barrel in electronic trading on the New York Mercantile Exchange after closing at $128.98 a day earlier, reported AP.

The June contract, which expired Tuesday, shot to a record intraday high of $129.60 before settling at $129.07 a barrel, up $2.02 from Monday. The expiration of that contract created additional volatility as traders scrambled to lock in positions.

Tuesday's performance was the 10th time in the last 12 sessions that crude prices have hit trading or closing records, if not both.

"I keep making projections, and they keep turning out to be too low," said Darin Newsom, senior analyst at market analysis provider DTN. "We're already pushing up against $130. If we clear that, there's no reason to believe crude oil can't get to $140."

Oil futures are now selling for about twice what they were just a year ago. Prices have been propelled by a number of factors, including worries about insufficient supply, soaring global demand and a sliding dollar that has made oil cheaper for some buyers overseas. Speculative buying has also helped push prices higher, analysts say.

Industry observers in recent days have also pointed to especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power. The country is also ramping up diesel imports ahead of the Olympics, analysts say, driving up prices.

DTN's Newsom said that trend is likely to continue at least through the beginning of the Aug. 8-13 games.

"China going into the Summer Olympics is putting its best face forward. They're going to continue to bring in diesel for their power plants and are going to have plenty on hand," Newsom said. "What's going to happen after that, we don't know."

Crude's latest surge came one day after Algerian Energy Minister Chakib Khelil, OPEC's current president, was quoted by a government newspaper as saying the cartel won't boost output before its next meeting on Sept. 9, adding to concerns about global supply.

That added to worries about gasoline and diesel supplies at the start of the summer driving season in the U.S., where retail prices for the motor fuels are already at record levels. Many analysts expect prices for both fuels will continue to rise.

In other Nymex trading, heating oil futures fell 0.4 cent to $3.771 a gallon while gasoline prices fell 0.44 cent to $3.30 a gallon. Natural gas futures, meanwhile, rose 5 cents to $11.415 per 1,000 cubic feet.

In London, July Brent crude rose 4 cents to $127.88 a barrel on the ICE Futures exchange.

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