U.S. oil prices touched a nine-month high Friday sparked by worries of low U.S. fuel supplies from creaking refineries and an upsurge of violence in the Middle East.
It was the third day of gains after a weekly U.S. report on Wednesday showed gasoline stocks failed to build up and heating oil inventories fell. That sparked concern U.S. refiners, running at 89% of capacity, would be have a hard time making enough fuel during prime vacation driving season.
"Gasoline is very strong because refinery runs are at 89% and stocks are below average," said Christopher Bellew, senior vice president, Bache Commodities.
U.S. light sweet crude settled 35 cents or 0.5% higher at $68.00 after hitting a fresh nine-month high at $68.30. Brent crude last settled 11 cents higher at $71.47 a barrel, after hitting $71.88, the highest level since August 2006.
RBOB Gasoline rose 3.54 cents or 1.6% to settle at $2.2601.
Markets were rattled further after Hamas Islamist fighters took control of Gaza after six days of civil war.
Dealers weighed the potential of a wider conflict drawing in neighbouring Middle East states which pump a quarter of the world's oil.
Tension was already high over supply disruptions in Nigeria, Iran's atomic programme and low supplies of gasoline in top fuel consumer the United States.
U.S. gasoline stocks were running about 6% below a year ago following a prolonged stretch of refinery outages, while heating oil inventories slumped to levels one-third below
"Both markets are very bullish," said Makoto Takeda, of Tokyo's Bansei Securities.
With oil demand rising, the stage was set for even further tightening, according to the International Energy Agency (IEA).
The adviser to 26 industrialised countries has repeatedly called on the Organization of the Petroleum Exporting Countries to pump more crude to avoid a supply crunch later this year.
OPEC insists the problem lies mostly with U.S. refinery bottlenecks. The 12-member producer group said on Thursday that current supplies were sufficient and there was no need to boost
output at the moment.
Oil is up from about $50 in January though it remains below the all-time highs hit in 2006.
Nearly a year ago, U.S. crude reached a record $78.40 on fears that fighting between Israel and Lebanese Hizbollah guerrillas could spread to Middle East oil producers.