NEW YORK -- Oil futures blasted to a record high near $123 a barrel yesterday, gaining momentum as investors bought on a forecast of much higher prices and on news hinting at supply shortages. Retail gas prices edged lower, but appear poised to rise to new records of their own in coming weeks.

On Wall Street, investors shrugged off the news and laid bets that the economy and companies were in recovery mode.

The Dow Jones industrial average rose 51.29 to 13,020.80. The Standard & Poor's 500 index rose 10.77 to 1,418.26, and the Nasdaq composite index rose 19.19 to 2,483.31.

A Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years seemed to motivate much of yesterday's buying, although a falling dollar and increasing concerns about declining crude production in Mexico and Russia contributed, analysts say.

The Energy Department raised its oil and gasoline price forecasts, but also predicted that high prices will cut demand more than previously thought.

Light, sweet crude for June delivery jumped to a record $122.73 a barrel before retreating to settle at $121.84 on the New York Mercantile Exchange.

Oil prices have nearly doubled from about $62 a barrel a year ago, which Goldman sees as a sign that the world is in the midst of a "super spike" in oil prices. Analyst Arjun Murti said in a research note Monday that prices ultimately would force demand to fall sharply.

Not everyone shares Goldman's view. Tim Evans, an analyst at Citigroup Inc., countered Goldman's analysis with a note predicting that crude prices could as easily fall to $40 a barrel as rise to $200 over the next two years because supplies are, as Mr. Evans put it, comfortable.

Meanwhile, in a monthly report, the Energy Department's Energy Information Administration predicted oil prices would average $110 a barrel this year, up $9 from last month's forecast. The EIA also said high prices would cut U.S. demand for petroleum products by 330,000 barrels a day this year; last month, the EIA predicted U.S. petroleum consumption would fall by 210,000 barrels a day.

But strong demand for oil from countries such as China, India, Russia, Brazil and those in the Middle East will support high prices and keep global oil demand growing by about 1.2 million barrels a day this year, unchanged from last month's forecast, the EIA said.

A falling dollar yesterday also gave traders reason to buy. Investors often buy commodities such as oil as a hedge against inflation when the dollar falls, and a weaker dollar makes oil cheaper to investors overseas. Many analysts feel the dollar's protracted decline is the real reason oil prices have nearly doubled since last year.

Mr. Cordier said investors also were increasingly concerned about falling oil production in Russia and Mexico.

In its report, the EIA said gas prices would peak at a monthly average of about $3.73 a gallon in June, about 13 cents higher than its previous forecast.