March 28 (Bloomberg) -- Crude oil surged above $64 a barrel to close at a six-month high in New York on concern that tensions with Iran will escalate, disrupting shipments from the Middle East.

``It is now time to ratchet up the pressure,'' Prime Minister Tony Blair said in Parliament in London today, referring to the capture of 15 U.K. naval personnel. Oil jumped late yesterday on speculation the U.K. would mount a rescue attempt. A report today showed that U.S. crude oil, gasoline, diesel and heating oil supplies declined last week.

``As long as the British naval personnel are held, prices are going to move higher,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``The chances of a military incident occurring in the Persian Gulf are high. The volatility that occurred last night is probably a preview of what we will see in the weeks to come.''

Crude oil for May delivery rose $1.15, or 1.8 percent, to settle at $64.08 a barrel at 2:57 p.m. on the New York Mercantile Exchange. It was the highest close since Sept. 11. Prices are down 3 percent from a year ago.

Prices rose from 1979 through 1981 after Iran cut oil exports. The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department, or $79.67 in today's dollars.

``The recent price moves show that geopolitical factors are back front and center,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Sentiment is bullish. Geopolitical tension and tightness in the gasoline market are the twin pillars of this market.''

Gasoline Stockpiles

Prices retreated from the day's highs after an Energy Department report showed that U.S. gasoline supplies fell less than expected. Gasoline stockpiles declined 258,000 barrels to 210.2 million in the week ended March 23, leaving inventories 2.8 percent lower than a year earlier. A drop of 2.05 million barrels was expected, according to the median of 14 forecasts in a Bloomberg News survey.

Gasoline imports surged 41 percent to 1.13 million barrels a day last week, the report showed. U.S. gasoline production rose 1.4 percent to 8.9 million barrels a day as refiners increased operating rates. Refineries operated at 87 percent of capacity, up 0.7 percentage point from the prior week.

``Consumers can take some comfort in the fact that high prices are attracting gasoline shipments from around the world and in the up-tick in refinery activity,'' Kilduff said.

Gasoline for April delivery in New York fell 1.58 cents, or 0.8 percent, to close at $2.0572 a gallon.

Ratcheting Up

``The situation isn't getting any better with Iran, there's been a major ratcheting up of tension,'' said Paul Horsnell, head of commodities research for Barclays Capital in London. ``We see Iran as being a major driver of oil prices through 2008.''

Horsnell said he put the finishing touches on an oil forecast of $70 a barrel for Barclays' global outlook last weekend, only to see Brent oil prices surge to $69 a barrel late yesterday, before the report was printed.

``It's ironic and rather frustrating -- what we said would happen already happened,'' Horsnell said. ``We've had a gradual, remorseless push up in price and then $5 in less than 10 minutes.''

Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. Relations between Iran, which sits on the world's second-largest proven reserves, and western governments were already frayed because of the country's nuclear program.

Possible Release

An Iranian Foreign Ministry spokesman said his country will release a British female sailor in detention ``within one or two days.'' Seaman Specialist Faye Turney was detained along with 14 other British sailors and Marines on March 23 in the Shatt al- Arab waterway, which separates Iran and Iraq.

Turney said on Iranian television today that her group had ``obviously trespassed'' into Iranian waters before their capture.

Vice Admiral Charles Style earlier told reporters in London that Iran's navy ``ambushed'' Britain's boats on the Iraqi side of the waterway.

``It increases people's concerns about how they would behave if they had a nuclear weapon,'' U.K. Foreign Secretary Margaret Beckett said in a statement to Parliament. She said she's considering whether to take the matter to the UN and to European Union foreign ministers.

Sanctions

The United Nations Security Council on March 24 unanimously backed a resolution freezing the assets of an Iranian bank and imposing penalties on some military commanders, to push Iran to suspend production of nuclear fuel. The package toughens sanctions approved in December.

``Whenever there is a headline about Iran, people prick up their ears,'' said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group Inc., in Englewood, New Jersey. ``If the Iranians release the British, oil should come off quite a bit.''

Brent crude oil for May settlement jumped $1.18, or 1.8 percent, to close at $65.78 a barrel on the London-based ICE Futures exchange, the highest since Sept. 7.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: March 28, 2007 15:31 EDT