On the New York Mercantile Exchange, light, sweet crude for June delivery hit a new peak of $127.43 US. It later pulled back to $127.07, up $2.95 from Thursday's close.

The possibility of increased Chinese demand for diesel fuel to power generators in the wake of this week's earthquake was cited as one reason for Friday's rise.

Also adding some push to oil was a new forecast from Goldman Sachs, which upped its second-half price forecast to $141 from $107 a barrel.

"To balance trend global GDP growth of 3.8 per cent against trend supply growth of 1.0 per cent, prices need to rise on average 14 per cent from here in the second half," Goldman Sachs said.

Other factors driving the surge were the expiry of options, and weakness in the U.S. dollar.

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