Oil prices bounced back above $54 on Friday as traders pushed prices up ahead of the weekend after the International Energy Agency (search) said robust growth in the United States and China will pump up consumption even faster than expected this year.
U.S. light crude (search) bounced off session lows under $53 to settle 89 cents higher at $54.43 a barrel after tumbling more than $1.20 on Thursday. Brent crude in London settled 44 cents higher at $53.10 on Friday, having set a record $54.30 on Wednesday.
"The rampant speculation identified yesterday's sell-off as another buying opportunity," said Mike Fitzpatrick, vice president, energy risk management, Fimat USA. "Aided by the IEA's recalculation of demand."
The IEA, which advises industrialized nations on energy policy, in its monthly Oil Market Report, revised up estimated 2005 demand growth by 290,000 barrels per day to 1.81 million bpd, taking annual global oil use to 84.3 million bpd.
Later on Friday, Venezuelan Energy Minister Rafael Ramirez said the Organization of Petroleum Exporting Countries (search) has no need to increase the cartel's oil production and should maintain existing crude oil production quotas.
OPEC oil ministers meet on March 16 in Iran to set market-share and production policy. Oil prices have risen about 25 percent since the start of the year on concern about rising demand and tight supply.
Crude prices earlier this week came within two cents of October's NYMEX (search) futures all-time peak at $55.67.
Adding support Friday was the weaker U.S. dollar after a report showed the U.S. trade deficit widened in January to its second biggest on record.
"In real terms and relative to incomes, oil prices are not yet at extreme levels," said Michael Lewis, head of commodities research at Deutsche Bank in a report.
"When crude oil prices are deflated by G7 consumer price inflation, we find that oil prices would need to rise to $60 a barrel and $100 a barrel in current nominal dollars to be equivalent to the two price peaks during the 1970s," Deutsche Bank said.
OPEC members Iran, Qatar, Venezuela and Algeria have come out in favor of keeping output steady, with Algeria's minister saying Thursday OPEC had no spare capacity to lift quotas.
China's February crude oil imports bounced back from a 14-month low in January, providing more price lift, signaling demand in the world's second-largest consumer was not slowing.
As OPEC prepares to meet in Iran next week, long-term supply security concerns were addressed by Secretary of State Condoleezza Rice who told Reuters that Washington would offer Iran economic incentives to abandon its suspected pursuit of nuclear weapons, marking a major shift in policy.
Washington had previously refused to reward Iran for what it regards as unacceptable behavior.
But later on Friday, Venezuelan President Hugo Chavez said he backed his fellow OPEC member in its dispute with the United States and Europe.
Chavez, who has had his own disputes with the United States, made his comments to visiting Iranian President Mohammad Khatami in Caracas.