Oil rose hit a new record today, reaching above $127 a barrel, after Goldman Sachs, the US investment bank, raised its forecast on speculation that crisis-hit China’s demand for diesel will strain supplies.

Crude oil for June delivery rose to $127.82 today, the highest since trading began in 1983. Prices have doubled in the past year.

Brent crude oil for July touched a record $126.34 today. Goldman Sachs raised its forecast from $107 to $141 a barrel in the second half of the year.

Arjun Murti, analyst at Goldman Sachs, said in a report earlier this month that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months”.

Mr Murti first wrote of a “super spike'” in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.

The US President, George W. Bush, today arrive in Saudi Arabia, the world’s biggest oil exporter, where he renewed his appeal for more oil. In response, Saudi Arabia repeated its pledge that it would pump as much oil as needed to meet demand but added this was unlikely to lead to any drop in fuel prices.

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