Crude oil prices rallied on Wednesday, recovering earlier losses and reacting to a new forecast by Morgan Stanley projecting Brent Crude prices will hit as much as $150 a barrel.
Analyst Richard Berner from Morgan Stanley said although the market is seeing high prices that may cut demand, Brent crude prices could easily reach $150 a barrel due to supply limits.
Last Friday, analysts at Goldman Sachs raised their forecast that crude prices will jump to $141 a barrel in the second half of this year and eventually the report helped to increase prices in New York.
Crude oil futures for July delivery rose $1.81 or 1.40 percent to $130.66 a barrel by 12:53 p.m. in the New York Mercantile Exchange.
Earlier futures slumped to $125.96 a barrel, below the line of $130 a barrel crossed for the first time on May 21, on concerns that high prices are putting pressure in consumers. Prices continued to rise hitting an all time record of $135.09 a barrel on May 22.
Brent crude futures for delivery in three months were trading up $1.47 or 1.16 percent to $128.72 a barrel in the London ICE Futures Exchange.
Overall there are supply concerns in the market. Crude oil hit the record above $131 a barrel on Wednesday as U.S. inventories declined more than expected on the week ended May 16.
The Organization of Petroleum Exporting Countries has not shown any attempt to rise crude production saying the market is well supplied and attributing gains to speculators and a falling dollar.
A weekly U.S. inventories report is due tomorrow and is expected to show crude stockpiles have risen 100,000 barrels last week, according to a Reuters forecast.
Analysts estimated gasoline inventories declined 100,000 barrels and inventories of distillate fuels including heating oil and diesel rose by 800,000 barrels on the same week.