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

Oil prices could rise even higher as U.S. demand picks up during the summer months, when gasoline consumption is typically the heaviest. Traders are clearly betting gasoline prices have a way to go too: gasoline futures jumped to a record $3.2438 a gallon on the Nymex before easing to $3.2116, up 4.58 cents.

President Bush, in Saudi Arabia for his second personal appeal this year to King Abdullah, apparently failed to persuade the oil-rich nation to boost crude production — a move that would likely have pushed prices lower.

Saudi officials maintained their position that they are already meeting demand. The kingdom is the world's largest producer of oil and is a key member of the Organization of Petroleum Exporting Countries.

"What they're saying to us is ... Saudi Arabia does not have customers that are making requests for oil that they are not able to satisfy," Stephen Hadley, the president's national security adviser told reporters.

Energy traders honed in 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.

"Accordingly, we would view any pullback in oil, regardless of the size or duration — although a correction could be as large as 15 percent — as an opportunity to re-establish long positions in oil before the summer," the bank advised traders.