Oil prices have hit a record high approaching $128 a barrel on speculation that China will need to import more fuel, stretching supplies.

With more energy needed to rebuild areas devastated by the earthquake this week, US light sweet crude hit $127.82 a barrel before falling to $126.29.

Prices were also supported by Goldman Sachs forecasting that oil would reach $141 a barrel later this year.

London Brent crude also rose, touching $125.82 a barrel before also slipping.

“Tight supply conditions continue to be the primary catalyst for higher crude prices,” Goldman Sachs analysts said.

The bank had previously predicted that US crude would reach $107 a barrel in the second half of the year.

Earlier this month, Goldman Sachs predicted that oil could reach $200 a barrel in the not too distant future.

Supplies

As the oil price rose, pressure from congress prompted the Bush administration to decide to cease renewing a critical governmental oil stockpile on Friday, in order to boost supplies.

The move by the US Energy Department follows legislation stipulating that emergency stocks should not be replenished until the price of crude oilis less than $75 per barrel.

The Bush administration has also been urging Saudi Arabia to increase output.

The US has already agreed to help protect Saudi Arabia’s oil infrastructure from terrorists and help it develop environmentally cleaner energy options.

Prices have risen by about 25% since the beginning of the year, lifted by geopolitical worries and the weakening US dollar, which makes oil cheaper for foreign buyers.

At the same time demand from fast-growing Asian economies, notably China, has exacerbated price pressures.