Oil surges to new highs, dealers focus on diesel

NEW YORK (Reuters) – Oil prices rose 1.4 percent on Wednesday, extending further into record territory amid intensifying worries over tight world supplies of diesel fuel.

U.S. crude leapt $1.69 to settle at $123.53 a barrel, before hitting an all-time peak of $123.89. London Brent rose $2.01 to $122.32.


Crude prices have doubled in a year and risen sixfold since 2002 on rising demand from China and other developing countries, adding pressure to economies already hard hit by a housing and credit crunch.

U.S. President George W. Bush will ask the Organization of the Petroleum Exporting Countries to increase production when he visits Saudi Arabia next week, a senior White House official said, adding to a slew of recent calls from consumer nations for more oil from the cartel.

Wednesday’s rally came after a U.S. government report showed a decline last week in distillate inventories — which include diesel and heating oil — that brought stockpiles in the world’s biggest energy consumer nearly 13 percent below a year ago.

Tight power supplies in China, South Africa, Chile, Argentina and parts of the Middle East have set off a worldwide boom in demand for diesel for use in electric generators, adding to robust demand for use in Europe’s passenger vehicle fleet.

There is a “bullish outlook for diesel,” French bank Societe Generale said in a research note.

Reuters