Crude settles at $123

Oil prices rose 1.4% today, extending further into record territory amid intensifying worries over tight world supplies of diesel fuel.

US crude leapt $1.69 to settle at $123.53 a barrel, before hitting an all-time peak of $123.89.

London Brent rose $2.01 to $122.32.

Crude prices have doubled in a year and risen sixfold since 2002 on rising demand from China and other developing countries, adding pressure to economies already hard hit by a housing and credit crunch.

US President George W. Bush will ask Opec to increase production when he visits Saudi Arabia next week, a senior White House official said, adding to a slew of recent calls from consumer nations for more oil from the cartel.

Tight power supplies in China, South Africa, Chile, Argentina and parts of the Middle East have set off a worldwide boom in demand for diesel for use in electric generators, adding to robust demand for use in Europe's passenger vehicle fleet.

There is a "bullish outlook for diesel," French bank Societe Generale said in a research note.

The report from the US Energy Information Administration also showed an increase in crude oil stockpiles of 5.7 million barrels and an increase in gasoline supplies of 800,000 barrels, tempering the market's gains.

"Traders were trying to comb the EIA data for any bullish feature and they found it in distillates," oil analyst Jim Ritterbusch, president of Ritterbusch & Associates, said.

Traders said there was also concern that an earthquake in Japan would shut nuclear power plants near the tremor and trigger an increase in fuel imports to compensate, though Japan's public broadcaster NHK said the quake had no effect on the facilities.

The advance in crude oil prices to fresh highs came a day after investment bank Goldman Sachs said oil prices could scale $200 a barrel in the next two years as part of an ongoing "super spike" in the market.

The head of the state-run company of Opec member Libya also said oil prices would likely rise further amid continued investor interest in commodities and simmering global political tensions.

Traders remained concerned about supply disruptions in Nigeria, despite the end last week of a strike that halted Exxon Mobil output in the West African country.

"We all share the concerns over supply issues as Nigerian production improves but is way off normal capacity, and, of course, Iran's nuclear debate has resurfaced and will not go away," MF Global Energy said in a research note