Oil rose to a record high above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange. Crude for July delivery touched a record $135.09 a barrel on the Nymex yesterday.

Record oil price has always been an issue to the worldwide economies. Due to the high oil price, many companies will find it extremely difficult to maintain their profitability, some even incur losses. Among those severely affected by oil price are those transport companies.

Oil price has rose sharply during past few years and even doubled during the past year. It was only $10 per barrel back in 1999 and mere $20 in 2004. What is the reason that it now cost $135 per barrel? Is it pure speculation or a genuine lack of oil supply?

Saudi Arabia had already announced that they will be increasing oil production by 300,000 per barrels a day to cope with the rising demand. But this does not seem to bring down the oil price. The reason is that financial markets are forward looking. The traders on the market are actually looking at the future supply. As the total amount of oil is limited, increasing supply now means that there will be less in the future. So the real factor is really the limited amount of oil, with a little speculation of course. Things will change only if you see in the headlines tomorrow that multiple oilfields had been discovered overnight and will provide the world with 500years worth of supply. Meanwhile, I’m expecting $200 per barrel to come soon.