Oil up to near $78 as weeklong rally continues

Oil prices were up to near $78 a barrel Friday, continuing a weeklong rally amid an unexpected drop in U.S. gasoline inventories. By mid-afternoon in Europe, benchmark crude for November delivery was up 10 cents at $77.68 in electronic trading on the New York Mercantile Exchange. Earlier in the session, it rose as high as $78.17. On Thursday, the contract rose $2.40 to settle at $77.58. The Energy Information Administration said Thursday that U.S. gasoline supplies fell 5.2 million barrels while analysts had expected a jump of 1.6 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Crude supplies rose 400,000 barrels, the EIA said, while analysts had anticipated an 2.2 million barrel gain. Until this week, oil had bounced between $65 and $75 since May. "The transition to a $70 to $80 range is now in full cry," Barclays Capital said in a report. "We expect further transitions upward to occur in line with improvements in the underlying market data." A falling U.S. dollar has also helped boost oil this week. Still, other analysts noted that global demand continued to be frail and warned it would be premature to expect prices to keep rising or even to remain near current levels. "The recent price rise has been very impressive and markets could well test $80, but in our opinion a correction next week is the likely scenario to back below $75 and even to the low $70s given oil fundamentals remain poor, global inventories are still high and demand recovery is far from convincing," said London's Sucden Research. Petromatrix analyst Olivier Jakob concurred, saying he had "no confidence at all in the current oil rally" because of the weak fundamentals. In other Nymex trading, heating oil fell 0.71 cent to $2.0110 a gallon, while gasoline for November delivery slipped 0.95 cent to $1.9354 a gallon. Natural gas for November delivery rose 4.4 cents to $4.526 per 1,000 cubic feet. In London, Brent crude for December delivery fell 20 cents to $76.03 on the ICE Futures. exchange. ___ Associated Press writer Alex Kennedy in Singapore contributed to this report.