NEW YORK (AFP) — Oil prices rebounded on Friday, reversing early losses as traders focused on stretched global supplies and a firming dollar.
New York's main oil futures contract, light sweet crude for July delivery, rose 73 cents to close at 127.35 dollars a barrel.
In London, Brent North Sea crude for July delivery gained 89 cents to settle at 127.78 dollars.
Traders sometimes buy oil contracts on a Friday to cover themselves against market shocks that might occur over a weekend when the markets are closed.
Prices fell heavily earlier this week as traders took profits from a record-breaking run that saw crude surge beyond 135 dollars last week on concerns about tightening energy supplies.
At 135 dollars a barrel, oil was up by more than a third since the start of 2008.
"Our view is that this bull run is not over," said Societe Generale analyst Mike Wittner, indicating that prices could head even higher.
"It's going to continue to be volatile ... there's further upside," he said.
Earlier on Friday, the market had traded in negative territory as traders took direction from the strengthening dollar, which makes dollar-denominated oil more expensive for buyers using other currencies.
"Overall, it seems clear that recent supply concerns were outweighed by the broad sell-off in commodities due to the recovering dollar," said Sucden analyst Andrey Kryuchenkov in reference to recent price losses.
In foreign exchange markets on Friday, the dollar resumed its climb against the euro and yen, after a rally overnight sparked by a government upward revision of first-quarter US economic growth, traders said.
In European trading, the euro fell to 1.5498 dollars from 1.5503 in New York late on Thursday.
"Oil was long due for a downward correction after such a strong run higher," said Kryuchenkov.
"In the long run, the market still remains well supported by limited supplies," he added.
Prices slumped by more than four dollars on Thursday amid fears of a potential easing in demand, despite a US government report that showed energy stockpiles had tumbled last week.
The US Energy Information Administration said Wednesday that American crude reserves sank 8.8 million barrels in the week ending May 23 while gasoline reserves dived by 3.2 million barrels.
Prices jumped higher after the news but then slid as some analysts speculated about falling energy demand amid sky-high prices.
Despite recent price losses, the high cost of crude continued to spark international concern this week.
British Prime Minister Gordon Brown warned Wednesday the world was facing a "great oil shock" that needed a comprehensive international strategy to address.
The Organization of the Petroleum Exporting Countries, which pumps 40 percent of the world's oil, is reluctant to bend to demands that it pump more oil to dampen the red-hot market.
Analysts said recent speculative oil trading had been driven by tight global supplies, the weak dollar, unrest in key crude producers like Nigeria, and OPEC's unwillingness to boost output.
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