LONDON, May 16 (Reuters) - The CME Group ( CME ) hiked

margin requirements for copper futures, which hit record highs

this week as investors with bearish positions were squeezed,

attracting further buying by speculators.

The copper rally that has seen CME prices jump nearly 30% so

far this year would likely remain on the boil in the short-term,

including on the London Metal Exchange, analysts said.

The U.S. exchange operator raised the outright margins on

copper futures by $500 to $5,000 per contract, effective after

the close of business on Thursday, the CME's clearing house said

in a notice.

Sources told Reuters on Wednesday that the CME rally was

partly fuelled by commodity traders Trafigura and IXM seeking

physical copper to cover large bearish positions on the CME.

The hefty jump in CME copper prices has outpaced gains on

the LME and created an opportunity for traders to buy on the LME

and sell on the CME, known are arbitrage trading.

"We expect the Comex premium over LME to narrow as

arbitrageurs ship physical units to the US, but this will take

time," Citi analyst Max Layton said in a note.

May Comex copper futures hit a record of $5.18 a lb

on Wednesday and were down 0.1% at $4.96 on Thursday at 1122

GMT.

Analyst Ed Meir at broker Marex said technical signals were

not yet showing a peak in Comex copper.

"Although prices came off their highs, they still finished

with decent gains, especially in the forwards and thus avoided

the washout usually associated with a peak," he said in a note.

The Comex May contract at its peak was equivalent to $11,414

per ton while the LME price benchmark price has risen as

far as $10,445.50 a ton and was up 2% at $10,418 on Thursday.