Oil prices spiked to a new trading high Tuesday, sweeping toward $130 a barrel as supply concerns intensified the momentum buying that has lifted crude deeper into record territory.
The June contract for light, sweet crude traded as high as $129.58 on the New York Mercantile Exchange before settling back to $129.12, up $2.07. The imminent expiration of the June contract created additional volatility in the market, and raised the very real possibility that crude could hit $130 before the end of the day, when the contract was ending.
In London, Brent crude for July delivery added $2.46 to $127.52 on the ICE Futures Exchange.
Oil's trek toward $130 coincided with the Labor Department's report of an unexpectedly sharp rise in wholesale inflation last month. The combination raised fears that inflation will slice into Americans' discretionary spending, and that sent stocks falling sharply on Wall Street.
Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois, said prices were being supported by strong demand for diesel fuel in Asia, and a weakening of the US dollar against the euro, which makes oil cheaper for some investors overseas.