Crude set for new climbs after hitting record $120

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US crude oil for June delivery was trading at $120.17 a barrel, up 20 cents. June Brent was trading at $118.22 a barrel, 23 cents ahead. At these levels adjusted for inflation, oil is now more expensive than the $101.70 peak it hit in April 1980, a year after the Iranian revolution.

Prices are rising on speculation that consumption in the US will grow with the peak summer driving season. A report also shows that US service industries expanded in April, signalling higher energy use.

Traders are expecting higher consumption in China during the Olympic Games in August, with strong demand from the country as Beijing increases refining capacity.

PetroChina & China Petroleum and Chemical Corp, which account for 90% of the nation's oil refining capacity, are expanding their plants and boosting imports.

China Petroleum is starting commercial output this month at its 10 million-tonne-a-year facility in Qingdao, parent China Petrochemical said last week.

The record oil price is likely to "snuff out" any recovery in the economy following the credit crisis, Ernst & Young's influential economics unit the ITEM Club has warned. It added that crude prices could see inflation statistics double.