Benchmark light, sweet crude oil futures for February settled at $68.35 a barrel, up $1.52 on Friday.

That marked its highest close since 1 September 2005, a time when the US Gulf Coast was reeling from Hurricane Katrina. Back months for some crude contracts this year ended above $70 a barrel.

 

Market participants say oil could soon challenge its record high just above $70 a barrel.

Michael Guido, director of commodity strategy for Societe Generale in New York, said: "Geopolitical fears and technical momentum continue to target the $70-a-barrel mark."


The February crude contract, which expired on Friday, rose more than $4, or about 7%, on the week. Heavy maintenance work at US refineries and Opec's upward revision for oil-demand growth this year helped cement the gains.

February heating-oil futures settled 7.03 cents higher at $1.8672 a gallon - the highest closing price since 28 October. Petrol futures for the same month settled up 4.1 cents at $1.8170 a gallon.

 

Sides of the Atlantic

In London, the price of Brent North Sea crude for March delivery gained $1.20 to end at $66.43 a barrel.

On both sides of the Atlantic, crude futures are testing highs not seen since late September. Traders said the record high reached on 30 August in New York - $70.85 a barrel - was in sight.

Lee Elliott, a Man Financial trader, said: "There is nothing in the market that says prices should come off at the moment."

There was a strong possibility of new records as early as the end of next week, he said. "You would not want to sell on the back" of the terrorism threat and problems in Iran and Nigeria.


Truce rejected  

The US rejected a truce offer purportedly from al-Qaida chief Osama bin Laden, made in an audiotape broadcast on Thursday on Aljazeera, despite a threat of more attacks on its soil.

Nigerian oil workers' unions meanwhile threatened on Friday to withdraw their members from the troubled Niger delta region if the government fails to stop continuing violence there. Armed rebels have threatened further attacks.

Unrest in Nigeria has added to
the rise in the price of petrol

Anglo-Dutch energy giant Shell, Nigeria's biggest producer, has been forced to cut output by 226,000 barrels of crude per day since the crisis began, 8% of Nigeria's daily output of 2.6 million barrels.

James Williams, WTRG Economics analyst, said: "The market was concentrating on Nigeria, Iran and the latest bin Laden tape.

 
"Of the three, Nigeria is of primary importance in the short term. It is a real threat, a current threat and involves tangible barrels of oil."

Iran, the second-biggest crude producer in Opec asked the cartel to reduce its oil production quota by one million barrels per day (bpd) from April.

Simmering crisis

The comments came as a crisis simmers over Iran, with Tehran warning the West that UN sanctions over its controversial nuclear programme could provoke a world oil crisis and even higher prices.

Hossein Kazempour Ardebili, Iran's Opec representative, said ahead of a 31 January meeting of the cartel: "Opec should not postpone the issue of output reduction.


"Iran has called for carrying out discussions and making decisions for a one million bpd of oil output cut in the second quarter."

Opec's production ceiling stands at 28 million bpd. At its last meeting in Kuwait on 12 December, the cartel decided not to renew an offer of two million bpd in emergency additional output.