Crude prices rose Friday after Iranian troops crossed into Iraq and seized an oil field.
Iraq's Deputy Foreign Minister Mohammed Haj Mahmoud said Iranian soldiers surrounded a well in the al-Fakkah oil field, only 200 miles southeast of Baghdad. It is one of the country's largest oil fields.
Just last week, major oil companies were in Baghdad to bid on oil service contracts as the country opens up to foriegn companies for the first time in 30 years.
Deals were reached in only seven of 15 oil fields, and most of those were in areas that have been relatively stable and free of violence.
Iranian troops are believed to have left the region and it remains to be seen if any weight will be given to the border crossing Friday.
A U.S. official said Iranians have crossed into the disputed region before, but this is the furthest inland that they have ventured.
Benchmark crude for February delivery added 34 cents to settle at $74.42 a barrel on the New York Mercantile Exchange.
While there are enormous supplies of crude now because of the global economic downturn, a conflict between Iran and Iraq would certainly crimp supply.
As things heated up in the Middle East, they cooled off in the U.S.
Energy prices increased all week as frigid temperatures blanketed the Midwest and Northeast. Government reports said that the country's oil, natural gas and heating oil supplies have all dropped more than expected as homes and businesses kept furnaces on high.
Next week, investors will be pay close attention to the Organization of Petroleum Exporting Countries' meeting Tuesday in Luanda, Angola. Leaders of the 12-member group have suggested the will leave production at current levels.
At the pump, retail gas prices extended their two-week slide, giving up a tenth of a penny overnight to a new national average of $2.589, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 4.3 cents cheaper than a month ago, but it's still 91.9 cents more expensive than last year.
In other Nymex trading in January contracts, heating oil fell less than a penny to settle at $1.9567 while gasoline rose 4.28 cents to settle at $1.8948 a gallon. Natural gas increased 1.4 cents to settle at $5.782 per 1,000 cubic feet.
In London, Brent crude for February delivery added 38 cents to settle at $73.75 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.