Oil rose to $71 a barrel on Friday after Nigerian rebels said they blew up a wellhead in a Royal Dutch Shell oilfield in the Delta state and as equity markets rallied on optimism the recession was easing.

The rise in oil followed a 2 percent gain on Thursday and put it on course for a 7 percent gain this week, buoyed by prospects for an economic recovery that has lifted prices from below $40 over the past four months.

The release of the June consumer sentiment index by the Reuters/University of Michigan Surveys of Consumers later on Friday was expected to reflect a mildly improving outlook for the U.S. economy, auguring well for ailing world energy demand.

Although U.S. jobless claims last week rose, first-quarter gross domestic product shrank slightly less than estimated, suggesting the downturn may be easing.

By 0737 GMT, the benchmark August U.S. crude oil contract was up 70 cents per barrel at $70.93, having hit a high of $71.23, up $1. London Brent rose 67 cents to $70.45.

Worry over the geopolitical situation is a big factor right now, and that's what's giving the market traction, said Peter McGuire, managing director of Commodity Warrants Australia.

Nigeria's Movement for the Emancipation of the Niger Delta (MEND) said it attacked the wellhead in the Afremo oilfield because the military had gone on a punitive expedition in Delta state shortly after President Umaru Yar'Adua announced an amnesty offer for rebels.


The military denied carrying out any such campaign. Independent confirmation of the details of the attack was not immediately available. Shell has said it is checking its operations for damage from Sunday's attacks.

Afremo was one of the sites MEND also said it had attacked in a triple raid on Sunday. It described the field as being 14 miles from an export terminal through which crude oil from Shell's Forcados fields is pumped.

Pipeline bombings, attacks on oil and gas installations and the kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two thirds of its installed oil output capacity of 3 million barrels per day.

The intensity of recent attacks in Nigeria have taken the oil market by surprise and tightened West African oil supplies.

Iranian tension has also supported oil. About 20 people have died in protests after Iran's June 12 presidential election, the worst unrest since the 1979 Islamic revolution.

Fuelling oil's rise, Exxon Mobil said its huge Baytown refinery suffered an operational glitch that triggered flaring, sparking worries the largest U.S. oil refinery could tighten gasoline stockpiles during this summer's peak demand driving season.

Firmer Asian stocks on the back of Wall Street's rally also lent support, with shares outside Japan climbing 1.4 percent and Japan's Nikkei up 0.8 percent.

European shares advanced in early trade.

A further boost came from a fall in the dollar against most major currencies on Friday as investors shifted funds back into risky assets after the Federal Reserve this week appeared to confirm it would keep interest rates low for a while.

The Reuters/University of Michigan final June consumer sentiment index, due at 1355 GMT, is expected to show a reading of 69.0 compared with 68.7 in the May report, a Reuters poll of economists showed.

(Additional reporting by Jennifer Tan; editing by Sue Thomas)