Oil rose towards $71 a barrel on Friday after Nigerian rebels said they blew up a wellhead in a Royal Dutch Shell oilfield and as equity markets rallied on perceptions the global recession was easing.

The move followed a 2 percent gain on Thursday and put oil on course for a 7 percent gain this week, buoyed by prospects for an economic recovery that has lifted prices from below $40 over the past four months.

The release of the June consumer sentiment index by the Reuters/University of Michigan Surveys of Consumers later on Friday was expected to reflect a mildly improving outlook for the U.S. economy, auguring well for ailing world energy demand.

U.S. first-quarter gross domestic product shrank less than estimated, suggesting the downturn was easing.

By 1110 GMT, benchmark August U.S. crude oil was up 50 cents per barrel at $70.73, having hit a high of $71.29, up $1.06. London Brent rose 46 cents to $70.24.

Nigeria’s Movement for the Emancipation of the Niger Delta (MEND) said it attacked the wellhead in the Afremo oilfield because the military had gone on a “punitive expedition” in Delta state shortly after President Umaru Yar’Adua announced an amnesty offer for rebels.

SHUT IN PRODUCTION

The military denied carrying out any such campaign.

Shell said it was investigating reports of an attack on its Afremo platform B facility, which had already been shut down following an attack on the Trans Escravos pipeline in February.

Afremo was one of the sites MEND also said it had attacked in a triple raid on Sunday. It described the field as being 14 miles from an export terminal through which crude oil from Shell’s Forcados fields is pumped.

Pipeline bombings, attacks on oil and gas installations and the kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two thirds of its installed oil output capacity of 3 million barrels per day.

The intensity of recent attacks in Nigeria have taken the oil market by surprise and tightened West African oil supplies.

“Attacks by the MEND have forced foreign oil companies to shut at least 133,000 barrels per day of Nigerian production in the last month,” MF Global said in its daily note to clients.

Iranian tension has also supported oil. About 20 people have died in protests after Iran’s June 12 presidential election, the most serious unrest since the 1979 Islamic revolution.

Fuelling oil’s rise, Exxon Mobil said its huge Baytown refinery suffered an operational glitch that triggered flaring, sparking worries the largest U.S. oil refinery could tighten gasoline stockpiles during this summer’s peak demand driving season.

Firmer Asian stocks on the back of Wall Street’s rally also lent support, with shares outside Japan climbing 1.4 percent and Japan’s Nikkei up 0.8 percent.

European shares advanced in early trade.

A further boost came from a fall in the dollar against most major currencies on Friday as investors shifted funds back into risky assets after the Federal Reserve this week appeared to confirm it would keep interest rates low for a while.

The Reuters/University of Michigan final June consumer sentiment index, due at 1355 GMT, is expected to show a reading of 69.0 compared with 68.7 in the May report, a Reuters poll of economists showed.

LONDON, June 26 (Reuters)

Crude prices jumped on Monday in electronic trading as news of the attack broke, but analysts said the impact on prices spilled over into Tuesday, when exchanges on both side of the Atlantic re-opened after the long weekend.

“Is it demand? Is it speculation? Is it OPEC punishing George Bush for the war in Iraq?” asks Dan Denning in The Daily Reckoning Australia. “OPEC thinks there’s plenty of oil. It’s the declining U.S. dollar that’s to blame. OPEC says that for every one percent decline in the dollar oil rises by US$4, and vice versa.

“The solution to high oil prices, then, is not increased supply or reduced demand, but a stronger U.S. dollar! Well, there is certainly some truth to that, but it is not likely to happen any time soon. As a tangible good whose supply cannot be increased by a central banker, the oil price (a little like the gold price) tells you there’s too much paper money chasing too little stuff.”

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