Oil Prices Back Above $74

Crude oil prices were steady Friday as concerns about Mideast fighting were weighed against comments by the U.S. Federal Reserve chief that surging energy prices are crimping economic growth.

Light sweet crude for September delivery slipped 7 cents to $74.20 a barrel on the New York Mercantile Exchange.

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"The energy futures all look like they've entered a period of consolidation or book squaring ahead of the weekend," Citigroup oil analyst Timothy Evans wrote.

But gasoline futures rose by more than 2 cents to $2.275 a gallon, reflecting concerns about refinery outages in Texas and Illinois.

September Brent on London's ICE Futures exchange rose 61 cents to $74.33 per barrel.

Israel massed tanks and troops on the Lebanese border Friday and warned civilians to flee Hezbollah-controlled southern Lebanon as it prepared for a likely ground invasion to set up a deep buffer zone. The oil market is fearful the fighting could spread throughout the region and threaten supplies.

But U.S. Federal Reserve Chairman Ben Bernanke's comments served as a moderating influence on the market. Bernanke said Thursday "the increase in energy prices is clearly making the economy worse off both in terms of real activity and in terms of inflation."

If oil prices were to rise another $10 or $15 a barrel, there would be "significant consequences" for the economy, he added. He said high energy prices are already hurting the economy, "in terms of real activity and in terms of inflation."

The sudden eruption of fighting between Israel and militants in Lebanon last week lifted crude futures to a record $78.40 last Friday, on fears that the fighting would escalate into a regional war and disrupt supplies.

While oil prices have receded from recent highs after data showed that U.S. petroleum inventories grew across the board last week, worries about the Middle East crisis linger.

"It is difficult to construct an argument for lower prices as long as the situation in the Middle East persists. It still has the potential to mutate into an uglier and uglier state of affairs with each passing day," wrote Fimat USA broker Mike Fitzpatrick in a research note.

Energy analyst Paul J. Harris of the Bank of Ireland Global Markets in Dublin said that while traders are closely following the fighting, "the market seems less concerned ... than a week ago," because the conflict shows no sign of spreading. Still, he said, "risks remain on the upside."

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