The price for a barrel of benchmark 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. This surpasses my estimate of $125 a barrel of oil before the end of May. Sparking the spike is likely the inability of President Bush to persuade Saudi Arabia to pump more oil. The Saudis consented to 300,000 bpd increase. His comments before the Knesset probably were’t very helpful nor was a report in the Israeli newspaper, Haaretz, that the US is determined to strike at Iran before the end of the year.

Goldman Sachs upped its YE2008 estimate to $141.00 a barrel yesterday. That is perhaps conservative. While oil is likely to pull back from whatever highs it reaches in May/June, it is unlikely to drop below a $115 a barrel floor. From August through the end of the year, oil is likely to trade in a range $120 to $150 a barrel. In effect, oil markets are undergoing a structural repricing. Weather, consumption and any geo-political are likely to dictate how oil behaves. If US-Iranians tensions escalate or if the Nigerian pipeline is not mended by the end of this month, oil is likely to move past $130 a barrel very quickly.