Oil prices settled above the psychologically important $70 a barrel mark on Friday for the first time since August 2006 on worries about gasoline supplies in the heart of the summer driving season.

Light, sweet crude for August delivery rose $1.11 to settle at $70.68 a barrel on the New York Mercantile Exchange after rising as high as $71.06 earlier in the session. Oil last closed above $70 a barrel on Aug. 31.

At the pump, gas prices continued to defy analyst expectations by falling 0.4 cent overnight to a national average price of $2.971 a gallon, according to AAA and the Oil Price Information Service. Retail gas prices, which typically lag futures markets, peaked at $3.227 a gallon on May 24.

Analysts have predicted for weeks that retail gas prices are bound to stop falling, and could even rise again, as demand picks up during the summer driving season. Demand is especially strong between the July 4 and Labor Day holidays.

Crude futures had fallen as low as $67.77 on Tuesday, the day before a government report showed gasoline fell when analysts had been expecting a big build. That Wednesday report fueled the late week rally into $70 territory.

The discovery of an unexploded car bomb in west London also boosted prices, analysts said. (AP)