NEW YORK (Reuters) - Oil rose above $73 a barrel on Friday, after an incursion by Iranian troops into an Iraqi oilfield sparked tensions between two major crude exporters. Frigid weather in the U.S. Northeast, the biggest heating oil market in the world, also supported prices.U.S. crude for January delivery -- which expires on Monday -- settled up 71 cents a barrel to $73.36. Barrels for February delivery, which were more heavily traded, rose a modest 34 cents a barrel. London Brent crude rose by 38 cents to $73.75 a barrel.
The strength in the front-month NYMEX contract was attributed to traders covering short positions as the end of the trading month nears and ahead of a holiday period week when trading is usually thin.
Crude's gains were slightly tempered by the firming U.S. dollar, which rose to a fresh 3-1/2-month high against the euro, as some investors remained wary of risky commodities and sought out safe havens.
Front-month U.S. crude rose as high as $74.69 earlier Friday on reports that Iranian soldiers crossed into Iraq with tanks and laid claim to a disputed oilfield there. The specter of rising tensions between two major crude exporters in a period of thin trade led to some buying.
Amid colder weather, U.S. natural gas inventories fell for just the second time this winter season, down 207 billion cubic feet, according to the U.S. Energy Information Administration.