NEW YORK (AP) -- Oil prices surged more than $3 Friday, shattering a previous record in a spike near $128 a barrel, as prices at the pump pushed to new highs of their own.

Americans are now paying a national average of $3.787 a gallon for regular gasoline, up nearly a penny from the previous day, according to AAA and the Oil Price Information Service.

Diesel prices also have risen to record levels, meaning that even Americans who don't drive will likely face even higher prices on all sorts of goods because of increased shipping costs. A gallon of diesel now sells for $4.482 a gallon.

Light, sweet crude for June delivery rose as high as $127.82 a barrel on the New York Mercantile Exchange, before easing somewhat to trade up $2.64 to $126.76 . The contract settled at $124.12 Thursday.

Oil prices could rise even higher as U.S. demand picks up during the summer months, when gasoline consumption is typically the heaviest.

Still, Saudi Arabia, the world's largest oil producer, does not see enough demand from customers to increase oil production, the White House said Friday morning. President Bush was in the oil-rich Gulf kingdom in part to lobby for an increase in crude output.

Also pushing oil prices up were speculation that China's demand for diesel needed to fuel its power plants would rise due to reconstruction efforts after this week's earthquakes and an upward revision of an oil price forecast by investment bank Goldman Sachs from $107 to $141 a barrel for the second half of the year.

"Everything the market looks at is bullish," said a report by U.S. energy risk management firm Cameron Hanover.

Technical trading, which takes into account prices patterns and other technical data instead of relying more on fundamentals such as supply and demand, also was seen as a reason for the high prices.

"Unless there is a confluence of substantive bearish news, when there is a pullback of something like $5, it's unlikely to stay down because enough participants will see that as a buying opportunity," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Thursday's expiration of options contracts and a temporary shutdown of ICE Futures trading in crude oil and other futures products due to a power outage also contributed to the previous session's volatility.

"So there was a lot of confusion yesterday, and not surprisingly, there was this wild, seesaw session," Shum said.

Options let investors bet oil prices will rise or fall in the future, and prices can fluctuate widely on days when options expire.

Shum said oil is still seen as a better bet than investors' other options.

"Oil as a class has performed better this year than equities and bonds, and continues to encourage investors to pile money into oil and stay in oil," Shum said.

On Thursday, the U.S. Energy Department reported that natural gas inventories rose 93 billion cubic feet last week, more than analysts had expected, and that pulled the whole petroleum energy complex lower.

Fluctuations in the dollar have contributed as well to oil's volatility. The dollar has generally been stronger than earlier in the year, but it is waffling between 104 and 105 against the yen, while the euro seems to be range-bound between $1.54 and $1.55.

Investors have been viewing oil and other commodities as a hedge against inflation and a weaker dollar since the middle of last year, and that link has meant that oil has been tending to rise and fall inversely with the dollar.

In other Nymex trading, heating oil futures rose 7.16 cents to $3.694 a gallon while gasoline futures added 6.12 cents to $3.227 a gallon. Natural gas futures fell 14.4 cents to $11.225 per 1,000 cubic feet.