May 9 (Bloomberg) -- Crude oil traded above $124 a barrel in New York after touching a record yesterday amid forecasts of stronger demand for distillate fuels, which included heating oil and diesel.

``There's huge diesel demand growth in Asia, which is going to keep pressure on supplies,'' said James Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois. ``Whenever there's a big rise in one energy market there's an impact on the psychology of the other markets. Also, demand for crude oil will rise as refiners boost distillate output.''

A May 7 government report showed that U.S. distillate-fuel inventories and refinery operations fell last week. Barclays Capital yesterday raised its forecast for U.S. crude oil prices, citing stronger demand from China and the Middle East.

Crude oil for June delivery climbed 51 cents, or 0.4 percent, to $124.20 a barrel at 9:06 a.m. in Sydney in after- hours trading on the New York Mercantile Exchange. Futures reached a record $124.61 a barrel yesterday and are double the level of a year ago. Earlier, oil rose 16 cents to settle at $123.69 a barrel, the highest close since trading began in 1983.

Distillate stockpiles declined 107,000 barrels to 105.7 million, the Energy Department reported. A 1.1 million-barrel decline was forecast, according to the median of 13 estimates in a Bloomberg News survey.

Heating Oil

Heating oil for June delivery climbed 6.25 cents, or 1.8 percent, to $3.5098 a gallon in New York yesterday, the highest close since trading began in 1978. The contract reached $3.5310, a record intraday price. Some traders use heating-oil futures to hedge their diesel and jet-fuel purchases.

Gasoline futures for June delivery rose 1.96 cents, or 0.6 percent, to close at a record $3.1378 a gallon in New York yesterday after reaching an intraday record of $3.1545 a gallon.

``A combination of tight supplies, the weak dollar and investors searching for value in this unstable economic climate have fueled the rally,'' said Rachel Ziemba an analyst at RGE Monitor, an economic research company in New York. ``The dynamic we are looking at is that of oil behaving as a financial asset.''

The euro rose from an eight-week low against the dollar after ECB President Jean-Claude Trichet said inflation remains the bank's top priority, signaling policy makers won't cut interest rates soon.

The euro was little changed at $1.5401 at 6:10 a.m. in Tokyo, after erasing earlier losses that drove it as low as $1.5285 yesterday, the weakest since March 11.

``The bull market isn't over,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``We had a number of stories over the last week that were bearish and ignored by the market, and I don't expect this cherry picking of the news to end anytime soon.''

Brent crude oil for June settlement rose 52 cents, or 0.4 percent, to $122.84 a barrel on London's ICE Futures Europe exchange yesterday, the highest close since trading began in 1988. The contract touched $123.92, an intraday record.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: May 8, 2008 19:23 EDT