* Iraq official says Iranian troops in Iraqi oilfield
* Cold U.S. weather cuts natgas stocks, supports oil
* OPEC won't change output-OPEC president, Saudi minister
* U.S. dollar firms to 3 1/2 month high vs. euro
(Recasts, updates prices, market activity to settlement)
By Joshua Schneyer
NEW YORK, Dec 18 (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 <CLc1> -- 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 <LCOc1> 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.
"We're in for some illiquid trading now until the new
year," said Gene McGillian at Tradition Energy in Stamford,
Connecticut.
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.
Iraq's Deputy Interior Minister said Iranian troops were
still occupying an oil well in a southern Iraqi oilfield. An
Iraqi government spokesman demanded the immediate withdrawal of
Iranian troops. []
"The Iraq-Iran issue is bringing some nervousness in the
market but I think there is a very high possibility that there
is nothing in the story," said Eugen Weinberg, oil analyst at
Commerzbank in Frankfurt.
The specter of rising tensions between two major crude
exporters in a period of thin trade led to some buying.
"We have this tension between Iran and Iraq. The timing of
the news, on the Friday before Christmas week, means that
traders out next week are covering shorts. The timing seems
more important than what the actual news means," said Peter
Beutel of Cameron Hanover in New Canaan, Connecticut.
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.
[]
OPEC MEETING
The Organization of the Petroleum Exporting Countries
(OPEC) will not change output targets when it meets in Angola
on Dec. 22, the group's president said on Friday.
[]
"Oil prices are trading at $70 to $75 per barrel, which is
the level our group has defended. I believe we will maintain
the decisions that were taken in the past about output quotas
and keep targets unchanged," Jose Botelho de Vasconcelos told
Angolan Radio Ecclesia. []
That view was echoed by the group's most influential oil
minister, Saudi Arabia's Ali al-Naimi.
"The (meeting) will not lead to any change in production,"
Saudi-owned al-Hayat quoted Naimi as saying. "And the oil price
of $75 to $80 is something we all want," Naimi told the
newspaper in Copenhagen, where he was attending the U.N.
climate summit. []
U.S crude oil is expected to rise to an average of $76.40 a
barrel in 2010 and $82.70 in 2011, a Reuters poll showed, as
global economic recovery solidifies and the demand for fuel
begins to soak up available supply. []
World leaders including U.S. President Barack Obama met in
Copenhagen on Friday to push for a new global climate deal, but
they appeared far from agreement on the core issue of
greenhouse gas emissions. []
"If there is no strong binding agreement, the market might
take it as a signal that fossil fuel demand will remain as it
is, which helps prices," Commerzbank's Weinberg said.
(Additional reporting by Edward McAllister in New York and Joe
Brock in London; Editing by David Gregorio)
