Oil Back Above $77

Oil bounces back to $77

LONDON (Reuters) -- Oil jumped back to $77 a barrel Friday as investors focused on tightening fuel supplies and brushed off worries about corporate borrowing costs and the U.S. economy that roiled stock markets.

U.S. crude for September delivery gained $2 to settle at $77.02 a barrel on the New York Mercantile Exchange, according to early tallies.

Sharp falls in global stock markets, triggered by weak U.S. housing data and tightening credit markets, had dragged crude more than $1 lower late on Thursday. But oil recovered its poise on Friday, remaining within sight of its record high of $78.40 hit last July.

"The upward movement again shows the market is tight on supply because of the peak demand period," said Gerard Burg, an oil and gas analyst from National Australia Bank.

A slowing of the U.S. economy would have an impact on energy consumption and some saw room for more downside on oil.

"We think there may be a little more room to go before the current downdraft runs its course," said a Man Financial report.

For now, however, fuel demand in the world's top consumer remains robust. Government inventory data on Wednesday showed a third straight draw in U.S. crude stocks.

Analysts said OPEC's output curbs would ensure a continuing decline in U.S. crude stocks through the third quarter.

Traders meanwhile continued to monitor the closure of most of ExxonMobil's 326,000-barrel per day Fawley refinery, which accounts for almost a fifth of Britain's refining capacity.

While bullish for gasoline and heating oil, the closure could be bearish for North Sea crude if the plant stops processing for a prolonged period. Exxon said on Thursday it plans to restart operations over the next several days.