Oil climbed to a new 11-month high above $77 a barrel on Friday after the International Energy Agency added to global supply concerns with forecasts of no let-up in fuel demand next year despite near-record prices.
London Brent, seen as the best indicator of the global market, rose $1.01 cents to $77.41 a barrel by 1430 GMT, after earlier reaching a new 11-month high of $77.60.
Brent is now only about a dollar short of last August's $78.65 all-time record.
Oil has gained more than $6 in the past two weeks on speculative buying by funds that have noted strong demand in top consumer the United States in the peak summer driving season.
U.S. crude gained $1.00 to $73.50 a barrel -- still way below Brent which has advanced on reduced North Sea crude supplies due to maintenance.
The IEA said on Friday oil demand will grow more quickly in 2008 than this year, boosting the need for OPEC crude.
But higher output and refinery capacity should ease pressure on supply, the adviser to 26 industrialized nations argued.
We see a slightly easier situation in several ways, said Lawrence Eagles, head of the IEA's Oil Industry and Markets Division. Total crude and liquids growth is in excess of demand growth.
The IEA report has traced a picture of continued market tightness going into 2008, Barclays Capital in a research note. The obvious consequence is an increased need for OPEC crude.
Dealers remain anxious over supplies from countries such as Nigeria and Iran, but most traders attribute much of oil's latest rally to a fresh infusion of fund money.
There is no lack of crude supply fundamentally, but funds are betting on a more bullish market, hence a great deal of buying, said Tetsu Emori of Astmax Futures in Tokyo.
Consumer nations have called repeatedly for members of the Organization of the Petroleum Exporting Countries to pump more to lower prices. OPEC ministers have rejected the call, saying markets are amply supplied.
An Iranian oil official reiterated on Friday that a surge in oil prices was not due to a lack of supply in the market.
OPEC is due to meet next in September.
(Additional reporting by Felicia Loo in Singapore)