Oil Over $74

Speculators drive oil over $74

LONDON (Reuters) -- Oil rose above $74 a barrel on Monday, driven towards an all-time high by an influx of speculative fund money and tightening crude supplies from the North Sea.

U.S. crude rose 17 cents at $74.10 a barrel, close to 11-month highs but still well below its record high of $78.40 set in July 2006.

London Brent climbed to a fresh 11-month high of $78.40 in earlier trade, just 25 cents shy of the record peak reached last August.

Seasonal maintenance on North Sea oilfields, coupled with unanticipated outages, has helped extend oil's near three-week rally, lifting Brent by more than $7 since late June.

"The markets will retain focus on North Sea production problems and refinery outages in the week ahead. These factors will continue to support prices at the current levels," said David Moore at Commonwealth Bank of Australia.

Speculative flows into commodities have also fueled the run-up, driven in part by fears a rush by U.S. refiners to produce enough gasoline this summer will leave the world's second-biggest consumer short of heating fuel in the winter.

"The direction of crude oil remains firmly in the hand of the large speculative funds," said Olivier Jakob of Petromatrix.

Speculators in the New York Mercantile Exchange crude oil market boosted net long positions to a record high in the week ending July 1 in a bet prices would rise, the Commodity Future Trading Commission (CFTC) said Friday.

Speculative net long positions in the NYMEX heating oil and gasoline markets also rose, hitting their highest levels in years, the CFTC data showed.

Forecasts for rising demand in 2008 would also reinforce bullish sentiment and support prices, analysts said.

World oil demand will grow more quickly in 2008, though more output and refinery capacity should ease pressure on supply, the International Energy Agency said Friday.

Price fluctuations in oil affect major producers including ExxonMobil, Chevron, ConocoPhillips and BP Plc.