An oil refinery in Elizabeth, New Jersey, U.S.A. is shown in this aerial photo of Wednesday, August 29. Oil prices settled at just under US$92, Friday. - File

Crude futures rose to record levels on Friday, supported by worries over political tensions in the Middle East where the United States imposed sanctions on Iran, and Turkish troops remained massed at the Iraq border to counter Kurdish rebels.

In addition, the market was unsettled by a dawn attack on an oil vessel off the coast of Nigeria by anti-government militants and suggestions that OPEC oil shipments are not rising as quickly as expected.

"On the back of mounting evidence that the oil balances are tight, and tightening, markets are becoming increasingly uneasy over the prospects of entering the winter high-demand season with inventories at too-low levels," Kevin Norrish, an analyst with Barclays Capital PLC, said in a research note.

While rising more than $1, crude futures retreated from an earlier all- time high above US$92 as investors sold to lock in profits from the latest multi-day record-setting rally.

Oil futures have risen nearly $7 a barrel, or eight per cent, since the government on Wednesday reported a sharp drop in crude inventories in the United States.

The inventory numbers reinforced a view that oil supplies are falling at a time of year when they should be rising to meet expected strong fourth-quarter demand.

Supplies still high

Light, sweet crude for December delivery rose $1.40 to settle Friday at a record US$91.86 a barrel on the New York Mercantile Exchange after rising overnight as high as $92.22, a new trading peak.

Crude prices jumped $3.36 a barrel on Thursday.

With the recent gains, the price of oil is closing in on the inflation-adjusted highs hit in early 1980. Depending on the adjustment, a US$38 barrel of oil in 1980 would be worth US$96 to US$101, or more, today.

Some analysts argue that the underlying fundamentals do not support such high prices, and say speculative buying is the real reason prices are rising.

Tim Evans, an analyst at Citigroup Inc., in New York, noted that despite last week's decline in domestic inventories, supplies remain high by historic standards.

Also, the Organisation of Petroleum Exporting Countries is set to boost production by 500,000 barrels a day beginning November 1.

"What we're seeing ... is rising supply and relatively weak demand," Evans said. He believes oil's "true value" is closer to US$65 a barrel.

Other petroleum futures also rose Friday.

November gasolene rose 3.82 cents to settle at US$2.274 a gallon on the Nymex, while heating oil futures rose 2.41 cents to settle at US$2.4325 a gallon.

November natural gas futures rose 0.3 cent to settle at US$7.218 per 1,000 cubic feet.

Ethanol on the Chicago Board of Trade was trading at US$1.730 mid-afternoon Friday.

- AP