Oil holds near $71 after gasoline-led rally

LONDON, June 23 (Reuters) Oil was steady below a barrel on Friday after evidence that U.S. motorists are driving more than ever spurred a two-day rally of more than .50.

Consumption in the United States, which uses more than 40 percent of the world's gasoline, is seen by investors and analysts as a bellwether for oil demand and price direction.

Data this week showed U.S. drivers are buying more gasoline than last year despite paying almost a gallon at the pump. Demand in the United States, consumer of a quarter of the world's crude oil, has been rising for 23 years.

U.S. crude was down 11 cents at .73 at 1053 GMT, in sight of its .35 record high hit in April. London Brent was down 18 cents at .77. Adjusted for inflation, oil is at its most expensive since 1980, the year after the Iranian revolution.

''With the U.S. and global economies still showing strong signs of resilience, expectations for oil demand growth in 2006 and 2007 remain robust,'' analysts at Deutsche Bank said.

Citibank analysts said U.S. summer gasoline demand was only just starting to kick in.

''The chances are that this week marked the seasonal high water level for gasoline inventories, as peaking summer driving season demand begins to eat into storage levels between now and the end of September.'' U.S. gasoline prices have risen more than 5 percent in the past two sessions.

''Gasoline inventories are not increasing as much as expected,'' said Andrew Harrington, analyst at ANZ Bank in Sydney. ''And there is a longer term fear that any storm or hurricane activity could disrupt supplies. That's setting up a very nervous market.'' OPEC OPEC output edged 300,000 barrels per day higher in June to 29.7 million bpd because of increases in the group's two biggest producers, Saudi Arabia and Iran, oil consultant Petrologistics told Reuters on Friday.

The exporter group has kept its official output ceiling, binding the 10 members excluding Iraq, at a near-maximum 28 million bpd for almost a year in response to a rally that has taken oil from at the start of 2002 to over .

Oil's rapid rise was sparked by strong demand in the United States and number two consumer China. It has been fuelled by a shortage of refineries to produce motor fuels and real or feared supply disruptions in Iraq, Nigeria and Iran.

Deutsche Bank raised its 2007 U.S. crude oil forecast to from .

''Supply and demand fundamentals in the energy markets are tight in the short-term, and rising costs and resource nationalism point to higher long-term prices,'' the bank said.

''Geopolitical and extreme weather events underscore upside risk.'' REUTERS CS DB1817