Oil sets record near $128; pump price at high, too

Oil prices shot to new highs again Friday 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 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 past 10 sessions traders rewrote the record books, and the first time prices topped $127 a barrel. 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 requests from customers. The market also had little reaction to the Energy Department's announcement said it would cancel shipments into the Strategic Petroleum Reserve for six months beginning July 1.

Oil industry observers questioned whether either move would have a significant 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 was also 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.