London: Oil fell from a record high of $75.78 a barrel on Friday on signs of a decrease in tension between the West and Iran, the world's fourth largest oil exporter.
Iran's chief nuclear negotiator said he had a "positive impression" of a Western proposal for Iran to stop enriching uranium in return for a package of incentives.
Oil had earlier risen due to strong demand in the United States. US crude was $1.14 lower at $74 a barrel at 1806 GMT having earlier on Friday hit an all-time high of $75.78.
Prices drew early support from a US government report on Thursday showing gasoline demand grew by 1.4 percent in the last four weeks from a year ago.
"While the global economy is staying strong, demand is going to be very supportive," said Tony Dolphin of Henderson Global Investors. "I don't see oil falling back a lot. I think it is likely to remain in a range and perhaps gradually drift higher."
Oil in New York is up 23 percent this year because of supply cuts in Nigeria, the dispute over Iran's nuclear work and a flood of investment fund money into commodities. North Korea's missile tests this week added to global tensions.
"North Korea has been a minor or secondary factor in what's happened to oil this week," said Mike Wittner of investment bank Calyon.
"The main factor has been new money coming in." Nigeria, Iran adjusted for inflation, oil is more expensive than at any time since 1980, the year after the Iranian revolution.
"In the very near term, it's hard to see the oil price coming down appreciably," said David Dugdale of MFC Global Investment Management.
Rebel attacks in Nigeria have shut almost a quarter of the country's output and the Iranian nuclear row has raised fears of supply cuts from the major exporter.
Western powers have demanded Iran make a full reply to an offer of a package of incentives for it to halt nuclear enrichment by a July 15 Group of Eight summit in St Petersburg. In Nigeria, the world's eighth-largest oil exporter, gunmen on Thursday abducted a Dutch man who was working on an unfinished Shell plant.
Growing demand and a strain on supply suggest that strong oil prices are here to stay unless a recession leads to a collapse in demand, investors say.
"High oil prices are now a permanent feature because of the rapid industrialization of Asia, particularly China," Henderson Global Investors' Dolphin said. "Their growth of demand is going to steadily increase and OPEC and other oil producers are going to struggle to keep up with it."
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