Oil futures rose Friday, extending a rally that began last week on concerns about potential supply disruptions overseas and continuing this week on a view that the economy may dodge a serious downturn.OPEC offered the oil market mixed news, trimming its demand forecasts for this year by 100,000 barrels a day but hinting that it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires. "It's always on the mind of traders what OPEC is going to do," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn.

Earlier in the week, prices rose on Venezuelan President Hugo Chavez's threat to cut off oil shipments to the U.S. in retaliation for Exxon Mobil Corp.'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets. Exxon has taken Venezuela to court over last year's nationalization of an oil field.



Meanwhile, several reports in recent days have suggested that economic conditions may not be deteriorating as quickly as feared. On Friday, the Federal Reserve said industrial production rose last month in line with analyst expectations.

Light, sweet crude for March delivery rose $1 to $96.46 on the New York Mercantile Exchange, oil's highest trading price since early January. Oil prices have risen nearly 10 percent in a little over a week.

Friday's industrial production numbers came on the heels of Thursday's Commerce Department report that the trade deficit fell in December and for 2007 as a whole — an indication the U.S. is exporting more goods — and Fed Chairman Ben Bernanke's suggestion that the central bank is prepared to again cut interest rates.

Lower rates support oil prices because they tend to weaken the dollar, which fell against the Euro on Friday. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Still, many analysts question oil's recent price strength, noting that the Energy Department, the International Energy Agency and now the Organization of Petroleum Exporting Countries have all cut demand growth forecasts for this year. At the same time, domestic oil supplies have risen for several weeks.

"It makes no sense," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., who suggested speculators may be behind rising oil prices. "I think it's financial and it's speculative."

Several analysts suggested short covering — that is, investors who had bet prices would fall are now being forced to buy contracts back to cover their positions — is boosting prices.

Kloza also noted that 1.5 million barrels of gasoline have been shipped from the U.S. to West Africa and the Caribbean in recent days, a rarity. Gas supplies typically flow in the other direction. But supplies in the Northeast are at their highest levels since 1999, which has pressured gasoline futures and left gasoline traders looking to sell their wares in other markets.

Indeed, March gasoline futures appeared to be leading Friday's energy rally, rising 2.58 cents to $2.5019 a gallon on the Nymex. At the pump, gas prices rose 0.5 cent overnight to a national average of $2.984 a gallon, according to AAA and the Oil Price Information Service.

March heating oil rose 0.44 cent to $2.671 a gallon on the Nymex, while March natural gas fell 2.2 cent to $8.75 per 1,000 cubic feet.

In London, April Brent crude futures rose 51 cents to $95.67 a barrel on the ICE Futures exchange.