Mumbai: Prices of crude-oil futures closed higher than $126 a barrel at the close of the week on Friday, albeit below the day's peak, but still modestly ahead of the week. Investment firm Goldman Sachs raised its oil forecast for the second half of 2008 by 32 per cent.

June delivery crude went up $2.17, which is 1.7 per cent, to close at $126.29 a barrel at the New York Mercantile Exchange. Last week, it closed at $125.96. The contract expires at the end of trading on 20 May. The day's peak was at $127.82.

Investment firm Goldman Sachs raised its forecast for the average price of West Texas Intermediate oil for the second half of 2008 to $141 a barrel, up from its earlier reading of $107 a barrel. The firm said that long-term oil prices will continue to rise to bring trend oil demand growth in line with trend supply growth. That stands at 1 per cent a year. Goldman Sachs also predicts that long-dated prices would have to go above 14 per cent above current levels to around $148 a barrel.
This report follows an earlier report by Goldman Sachs during the first week of May this year, which predicted that oil prices would most likely hit $150 to $200 a barrel anywhere between the coming six to 24 months.

Comments from from Saudi Arabiain response to President Bush's request for more oil production did not help prices either. His request was tacitly dismissed, with the oil rich Middle East country explaining that it did not see enough demand from from customers to justify increased oil production, besides hinting that they had already increased production only weeks ago.

According to industry sources, speculators have a grip on the market that is strong enough to push prices past the $127 level, in addition to a dawning realisation that global demand is rapidly outstripping supply realities, with an estimated 4 per cent global demand growth outpacing the 1 per cent annual growth in production figures on a global scale.

Additionally, ongoing disruptions in oil producing Nigeria contribute to supply fears, which again, drive prices.

On Friday, the average price for a gallon of regular gasoline in the US rose to a never-seen-before level of $3.787 , a penny more than Thursday, as per AAA's Daily Fuel Gauge Report. Pump prices have gone up 11.4 per cent from a month ago, and 21.6 per cent from a year ago.

Refiners profits have dropped by over 50 per cent during the last six month period, placing restrictions on their expansion intentions.

Additionally, diesel has also seen tighter supplies since the past several months after a cold winter in the northern hemisphere, and diesel cars becoming increasingly popular in Europe and India. Diesel prices hit a new record on Friday at $4.482 a gallon, according to AAA's survey.

Indian oil marketing companies plan to ration fuel supply.<<<<<<<< BOLD
Meanwhiles, the oil marketing companies in India have started to ask the government to cap the number of LPG connections, a critical cooking fuel in India. The companies have demanded that supplies of cooking gas, diesel, kerosene and petrol need to be rationalised, as they become increasingly cash-strapped with the spiking price of oil. The top thee companies that market petroleum in India are the Indian Oil Corporation (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL).

Given the upcoming general elections in less than a year, the government would not like to irk the voting Indian public by giving in to the oil company's demands for regulations of petroleum. Sources in the oil industry say that the oil companies no longer have enough liquidity to import and meet the burgeoning demand, let alone see some form of profit, or capped losses.

With tough times asking for tougher measures, oil marketing companies have suggested some drastic measures to cut losses, including a cap on additional LPG connections, aquota per family, no imports of diesel and petrol, and the continuance of quota for kerosene.

Indian oil marketing companies estimate their under-recoveries at around Rs 180,000 crore during the current fiscal, with their losses on the sale of petrol (gasoline), diesel, LPG and kerosene distributed by the public distribution system (PDS) mount to over Rs550 crore a day. These companies borrow around Rs3,500 crore per month to sustain their operations, and combined, the borrowings of the three oil marketing companies have already reportedly hit Rs65,000 crore.