Oil Prices Move Above $70 Mark

NEW YORK – Oil prices rose above $71 a barrel on Friday as investors focused on falling gasoline and crude stocks in key regions of the United States, the world's top consumer.

London Brent crude settled up 89 cents at $71.41 a barrel. U.S. crude oil settled $1.11 at $70.68, the highest settlement since August 25.

Oil gained following a U.S. government report Wednesday that showed gasoline stocks off 700,000 barrels last week. Crude inventories at Cushing, Oklahoma, the delivery point for the U.S. crude benchmark, dropped 1.4 million barrels.

"The inventory numbers are giving the pattern for the rest of the week," said Kevin Blemkin, an oil broker at Man Financial.

While U.S. crude stocks nationwide rose by 1.6 million barrels to a nine-year high, the drop at Cushing has supported gains for U.S. crude prices and helped narrow their discount to Brent to below $1 a barrel.

The U.S. crude benchmark had been trading at an atypical discount to Brent since February, weighed down by higher inventories after a spate of refinery outages cut demand.

Several U.S. refineries are raising production rates following their return from maintenance, leading to the inventory drop at Cushing and prompting expectations of further declines.

"We're heading into the July 4 holiday, the peak of summer demand, at the same time refineries are coming back on line. That's what's holding up this market," said Jason Schenker, economist at Wachovia Bank.

Lehman Brothers said the narrowing gap between Brent and U.S. crude was related to quality issues that were putting downward pressure on August Brent relative to the contract in other months.

The bank said in a research note maintenance at the high-quality Forties fields, which are part of the Brent contract, would lead to a higher sulfur content in August cargoes.

"August Brent is likely to continue disconnecting itself from the rest of the Brent futures curve until the contract expires on July 16," Lehman analysts wrote.