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Oil prices hit record above $75 a barrel, then ease back

WASHINGTON - Oil prices climbed Friday and reached record territory above $75 a barrel for the second time this week on geopolitical tensions and rising gasoline demand.

The ongoing nuclear standoff between the West and Iran is keeping a high floor beneath prices because of fears that sanctions imposed against Iran could prompt OPEC's No. 2 producer to withhold some of its crude from the market. Other geopolitical factors include the war in Iraq, which has hindered output there, and instability in Nigeria, which has forced the shutdown of some 500,000 barrels-a-day of oil production.

The increasing motor-fuel consumption comes despite near-$3-a-gallon pump prices, and analysts say even the slightest interruption to the flow of crude or refined products could push prices above that psychologically significant benchmark.

Still, oil futures have risen in 10 out of the past 11 trading sessions, leading some analysts to anticipate a pullback - on profit-taking - before a continuation of the uptrend.

''The bigger trend is pretty well intact,'' said Michael Guido, Societe Generale's director of commodity strategy.

Light sweet crude for August delivery climbed as high as $75.78 a barrel in electronic trading on the New York Mercantile Exchange before easing back to $75.30, up 16 cents. The previous intraday record was $75.40 set Wednesday.

Nymex gasoline futures were steady at $2.2625 a gallon.

Oil futures are 24 percent higher than a year ago. The average retail price of gasoline is $2.94 a gallon, or 32 percent above year ago levels.

In its weekly inventory report, the Department of Energy said Thursday that U.S. gasoline consumption over the past four weeks averaged 9.5 million barrels a day, or 1.4 percent more than a year ago. U.S. refiners ran their plants at 93 percent of total capacity.

The global oil industry is pumping roughly 85 million barrels a day to meet rising demand but there is little room for error, analysts say, because the amount of spare production capacity that could be tapped in an emergency is razor thin. The same goes for the refining end of the business.

As a result, any real or feared disruptions to output can push prices sharply higher, making energy traders eager to make that bet.

''The financial players are attracted like a moth to a flame to the energy complex,'' said Larry Goldstein, president of the Petroleum Industry Research Foundation, a New York-based industry-financed think tank. ''If you bet right, you get unreasonably rewarded.''