Demand from US refineries has increased for six successive weeks

The price of a barrel of US light, sweet crude surpassed the previous high of $78.40 a barrel, seen in July 2006, before falling back to $76.53.

Prices have risen steadily in the past few weeks following disruption to output in Nigeria and the North Sea.

Wednesday's initial rise followed data showing a fall in US crude stockpiles.

Falling stocks

The Department of Energy said that oil inventories had fallen by a higher-than-expected 6.5 million barrels in the week ending 27 July.

Analysts had been forecasting a far more modest fall of about 700,000 barrels.

Experts said the later fall in the price was due to a decline in gas prices and a feeling that, with the peak summer holiday season nearing its end, prices may have peaked.

Oil markets have withstood recent stock market turbulence, taking their lead from positive economic signs in the US about employment and consumer confidence.

Despite a rise in output from the members of the Opec oil producers' cartel last month, traders are still worried about the amount of spare capacity in the market.

US Energy Secretary Sam Bodman said Opec needed to commit to raising production levels when it met next month.

"I am concerned that we probably are going to need more oil," he said.

The previous $78.40 high was recorded during the Israel-Lebanon conflict last year.

In London, Brent crude fell $1.70 to close at $75.35 a barrel.