Oil surged to an 11-month high above $76 a barrel on Friday, closing in on the all-time record as Nigerian disruptions and OPEC output cuts stirred supply concerns amid rising U.S. refiner demand.
London Brent crude, currently seen as a better indicator of the global market, settled up 87 cents at $75.62 a barrel, after touching a session high of $76.01, its highest since August 2006. The rise put Brent within striking distance of the record $78.65 struck last August.
U.S. crude gained $1.00 to $72.81, the highest settlement since August 22, 2006.
The global oil picture is fairly tight in terms of supply and demand growth, said Harry Tchilinguirian, senior oil market analyst at BNP Paribas.
Global oil demand growth is increasing faster than non-OPEC supply in the second half of 2007 while OPEC has met most of its supply cuts and Nigeria's output is being disrupted.
Together, these elements are very supportive of prices, Tchilinguirian said.
Some 611,000 barrels per day (bpd) of Nigerian production is shut in after a year and a half of attacks on its oil industry.
A one-month truce by the rebel group responsible for much of the violence directed at the Nigerian oil industry has recently ended. Nigerian rebels have attacked an oil rig and kidnapped a 3-year-old British girl in Port Harcourt in the oil producing Niger Delta.
We think the oil market is in deficit, said Markus Mezger, partner at Tiberius Services AG, a Swiss-based asset manager in commodities futures funds.
The rising (crude) stocks in the U.S. is not representative of the global stock levels. We think OECD inventories saw a drawdown in the last month.
Expectations that summer maintenance will reduce supplies of crude from the North Sea oilfields has also helped keep Brent higher relative to crude in the United States, where supplies are at nine-year highs.
U.S. refinery demand is set to start soaking up the crude stocks. Analysts expect refineries to ramp up crude oil runs in the coming weeks after a spate of lengthy unplanned maintenance shutdowns.
Last week, inputs to U.S. refineries rose in every part of the United States, except for the West Coast, according to U.S. government data.
Gasoline supplies worldwide are also tightening.
Northwest European stock levels have fallen to a two-month low, exports from key Asian exporter China in July will drop to their lowest in 10 months and Japanese stocks this week dipped below year-ago levels for the first time this year.
(Reporting by Felicia Loo in Singapore, Janet McBride in London, Robert Campbell and Matthew Robinson in New York)