New York : Oil surged to a record peak near $127 on Tuesday after Iran said it was studying a plan to cut output despite signs that record high prices are hurting consumer nations.
US crude jumped $1.77 to $126.00 a barrel by 1604 GMT, after striking a record $126.98 earlier. London Brent crude rose $1.10 to $124.01 a barrel.
President Mahmoud Ahmadinejad said a proposal to reduce Iran’s crude output was being reviewed by experts, the Fars News Agency reported on Tuesday.


“There has been such a proposal and it is under expert review,” Fars quoted Ahmadinejad as saying when asked about the possibility of the world’s fourth-largest producer reducing output.


“That sounds like it would get people excited. We’re in a market where anything bullish is going to be able to push the price higher,” said Peter Beutel, president of Cameron Hanover.

Oil rallied back after closing lower on Monday when data showed a decline in oil imports by second-largest consumer China in April, the first year-on-year drop in 18 months, raising further questions about demand growth forecasts.

The International Energy Agency on Tuesday said record-high oil prices will slow global oil demand growth this year to 1.03 million barrels per day (bpd), 230,000 bpd less than its previous forecast.

The US Senate voted on Tuesday to suspend oil deliveries to the country’s Strategic Petroleum Reserve until crude prices fall below $75 a barrel, repudiating the Bush administration’s policy of boosting the stockpile at time of record oil and gasoline prices.

Oil prices have surged sixfold since 2002 as supply has struggled to keep pace with booming demand from emerging economies, leading consumer nations to call upon the Organisation of Petro-leum Exporting Countries (Opec) to ramp up production to help ease the sting of high fuel prices.

Precious metals: Gold falls more than 2%

Gold dropped more than two per cent yesterday as the dollar extended gains after news of unexpectedly strong core US retail sales in April robbed bullion of some of its appeal as an alternative investment.

Spot gold hit a low of $860.90 an ounce, down from $884.60/$886.00 late in New York on Monday.

Gold’s weakness spurred selling in other precious metals.

Platinum fell more than three per cent – the day after it jumped to its highest level in almost two months on speculative buying following the launch of US platinum exchange-traded notes.