Crude oil for April delivery on the New York Mercantile Exchange (NYMEX) ended down 11 cents at $24.45 a barrel. It traded as high as $24.75 a barrel, matching its highest level since Sept. 24.
Prices have gained 35 percent in the last two months and many brokers and traders see the bullish trend pushing the price of crude up to $26 a barrel and higher, levels not seen since before the Sept. 11 attacks on New York and Washington.
OPEC oil ministers, meeting in Vienna Friday, said they agreed to keep production steady at 21.7 million barrels a day (bpd) for 10 members until the end of June, with more than 5 million bpd of idle capacity in the 75-million-bpd world market.
"The bulls really have a hold of this market," said broker Patrick Patten of United Energy in New York.
Production cuts this year by the Organization of Petroleum Exporting Countries (OPEC), signs of a faster-than-expected U.S. economic recovery, and fears Washington was preparing to extend its war on terrorism to OPEC-member Iraq have combined to propel prices higher, traders said.
Industrialized nations are concerned that higher oil prices will derail the world economic recovery, analysts said.
U.S. consumers are already paying more at the pump for unleaded gasoline, which surged more than 10 cents in the past four weeks to an average $1.227 a gallon, according to the American Automobile Association.
Friday, the government said U.S. wholesale prices rose slightly in February, driven by higher gasoline prices.
Economists believe the rise in oil prices in 2000 -- U.S. oil hit a high of more than $37 a barrel, helped press the world economy into recession last year.
OPEC EXTENDS SUPPLY CUTS
Analysts said OPEC's spare production capacity could cover for any loss of output from OPEC's 11th member, Iraq, if Washington makes a military attack on Baghdad. President Bush labeled Iraq part of an "axis of evil" that included Iran and North Korea, in his State of the Union speech in January.
Iraq pumps 2.5 million barrels daily in an exchange for humanitarian aid monitored by the United Nations, still enforcing sanctions after Iraq's 1990 invasion of Kuwait.
OPEC also said it wants to keep the price of its exports in the $22-$28 a barrel range and wait for a global economic revival to increase demand for its oil.
"The price has only just entered the lower end of our band and we hope it moves higher as the economy recovers," Venezuelan Oil Minister Alvaro Silva said in Vienna Friday.
The 11-member group, which controls two-thirds of world crude exports, has this year cut supply to its lowest level for a decade. Those countries have also made production-reducing deals with non-OPEC members Russia, Norway and Mexico.
OPEC said it would meet again June 26 in Vienna to decide whether to extend its production cut policy into the third quarter.
Russia, the world's second biggest exporter after Saudi Arabia, will decide next week whether to hold current curbs of 150,000 bpd in place for the second quarter. Even if it does, one Russian official observing the OPEC meeting in Vienna said there was "zero chance" of cuts being extended beyond the end of June.
"Without Russia, Norway and Mexico, prices wouldn't be where they are today," analyst Timothy Evans of IFR Pegasus said in a research report. "OPEC will certainly have more non-OPEC competition in the second half of the year."