Oil prices gain 12 per cent two weeks

Oil prices have been rising for two weeks and are ruling 12 per cent higher with reports of economic revival in the US and troubles in parts of he world.

Crude closed at $80 a barrel on Friday with investors focusing on an ongoing refinery strike in France and reports of the Iranian regime going nuclear. Analysts say gasoline and other fuel prices may climb higher on an extended rally in oil and predict that prices at outlets would exceed $3 a gallon this summer in the US.

On Friday, crude oil had reached a five-week high with the Federal Reserve's discount-rate increase signaling an extended economic recovery and a strike at Total refineries in France cutting fuel output. Oil gained 0.9 per cent as the central bank said the decision was a ''normalisation'' of lending.

The Fed increased the rate for direct loans to banks by a quarter-point to 0.75 per cent on Saturday. On Sunday, French workers at Total's refineries started closing down oil-processing operations warning of shortages ahead. According to analysts the Fed's hiking the discount rate indicated they expect the US economy to improve further.

They add that it was a clear signal of growth in the cards and improving fundamentals.

The increase in the discount rate comes for the first time since June 2006 and with the central bankers closing four emergency lending facilities this month analysts say the authorities are preparing to reverse the more than $1 trillion in excess bank reserves they have infused into the banking system.