Oil rises above $85 a barrel, Brent set for seventh weekly gain

Oil prices stayed near multi-year highs on Friday, erasing some earlier losses in Asian trading hours, with concerns about tight supply and stockpiles fuelling bullish sentiment.

Brent crude futures rose 92 cents, or 1%, to $85.53 a barrel at 1335 GMT, after Thursday's three-year high of $86.10. The benchmark is set for its seventh weekly gain.

U.S. West Texas Intermediate (WTI) crude futures gained $1.05, or 1.3%, to reach $83.55 a barrel, not far off a seven-year high hit this week. The grade is heading for its ninth weekly rise.

Prices have been boosted by worries about coal and gas shortages in China, India and Europe, spurring some power generators to switch from gas to fuel oil and diesel.

Winter weather in much of the United States is expected to be warmer than average, according to a National Oceanic and Atmospheric Administration forecast.

"The upside risk to oil prices is real in the very near-term as there is little incentive to go short amidst a global energy crunch where OPEC+ is quietly sitting on the supply sidelines," said Rystad Senior Oil Markets Analyst Louise Dickson.

U.S. crude found support this week as investors eyed low crude stocks at the U.S. storage hub in Cushing, Oklahoma.

U.S. Energy Information Administration data on Wednesday showed crude stocks at Cushing fell to 31.2 million barrels, their lowest level since October 2018.

"America's gasoline demand appears to be experiencing an Indian summer," PVM analysts said in a note, pointing to the highest implied demand for this time of year since 2007 despite high pump prices.

(Additional reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Edmund Blair and Louise Heavens)