NEW YORK - Oil prices shot to new highs yesterday as traders, unimpressed by U.S. and Saudi efforts to boost supply, kept buying on the belief that prices had more room to rise.
Light, sweet crude for June delivery jumped $2.17 to settle at a record close of $126.29 on the New York Mercantile Exchange. Earlier in the session, prices surged to $127.82 a barrel, also a new high. It was the eighth time in the last 10 sessions that traders rewrote the record books.
Investors shrugged off news from Saudi Arabia's oil minister, Ali Naimi, that the country increased its production by 300,000 barrels a day last week in response to customers' requests. The market also had little reaction to the Energy Department's announcement that it would cancel shipments into the Strategic Petroleum Reserve for six months beginning July 1.
Oil industry observers questioned whether either move would have much effect on soaring energy prices.
"It's ridiculous because I don't think this is going to bring the price down," said Phil Flynn, an analyst at Alaron Trading Corp., of the Energy Department's move.
The effect of Saudi Arabia's move also was not immediately clear. The increase, which went into effect last Saturday, is relatively small, lifting total output from the world's leading producer to 9.45 million barrels per day by June.
The addition of "300,000 barrels won't make a lot of difference," said Mir Yousufuddin, who monitors crude prices for the U.S. Energy Information Administration.
The announcement came during a visit by President Bush, who was in the kingdom to appeal for a more significant increase in production.
Saudi Arabia often adjusts its output to meet demand, and the increase coincides with the start of the peak driving season in the United States.
"It's a way to raise production without raising production," Flynn said. "I think it was a way to save face."
Saudi Arabia has acknowledged the ability to produce as much as 11 million barrels a day.
Energy traders were more focused on an upward revision of an oil price forecast by Goldman Sachs from $107 to $141 a barrel for the second half of the year. The investment bank is predicting continued swings in oil prices as prices dip at times because of falling demand before again moving higher.
Crude's latest surge comes a week before the Memorial Day holiday, the traditional start of the summer driving season, suggesting retail gas prices have further to rise. Motorists are paying a national average of $3.787 a gallon for regular gasoline, up nearly a penny from the previous day, according to AAA and the Oil Price Information Service.