Oil price hits one-year high above US$78

Prices have climbed steadily in recent trading sessions, buoyed by a weak dollar that has bolstered investor risk appetite for hard assets such as oil.

New York's main contract, light sweet crude for November delivery, hit US$78.17 a barrel in Asian trading hours -- the highest level since Oct. 14, 2008 -- after official data showed a pick-up for US gasoline demand.

It later pulled back to stand at US$77.33, down 23 cents compared with Thursday's closing level.

Brent North Sea crude for December delivery dropped 40 cents to 75.83 dollars a barrel in early London trade on Friday.

"Crude prices were trading a little lower ... due to profit taking," said Sucden Financial Research analyst Nimit Khamar.

"The recent price rise has been very impressive and markets could well test 80 dollars but in our opinion a correction next week is the likely scenario to back below US$75 and even to the low 70s given oil fundamentals remain poor, global inventories are still high and demand recovery is far from convincing."

A U.S. government report published on Thursday showed gasoline, or petrol, stocks fell by 5.2 million barrels in the country last week. Analysts polled by Dow Jones Newswires had expected a rise of 700,000 barrels.

The fall in gasoline stocks indicates rising demand and tightening supplies, supporting prices, traders said.

US crude reserves meanwhile rose by 400,000 barrels last week, lower than most analysts' expectations for a gain of 600,000 barrels.

Despite signs of a demand pick-up appetite for oil has plunged amid the world economic downturn, the most severe since the 1930s.

Oil prices tumbled from historic highs of more than US$147 in July 2008 to about US$32 in December because of the global recession but have since won back ground on recovery hopes.

World oil demand will decline slightly in 2009 but start growing again next year, the OPEC oil producers' cartel said this week in its latest monthly report.

Global crude demand this year was expected to contract by 1.41 million barrels per day (bpd) to 84.24 million bpd, the Organization of Petroleum Exporting Countries said in its October report.

A month ago, OPEC had been pencilling in a fractionally bigger contraction of 1.56 million bpd for this year.

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