Updated from 2:50 p.m. EDT

Oil prices soared Friday as supply concerns in Ecuador and blasts in two Middle Eastern ports took center stage.

After declining in three of the previous four sessions, crude for September delivery closed up $2.08 to $65.35 a barrel on Nymex. Gasoline futures rose 4 cents to $1.90 a gallon.

Heating oil futures rose 4.5 cents to $1.83 a gallon.

Oil exports from Ecuador continued to be halted Friday after protests against foreign oil companies operating in Amazon provinces prompted a military response. Ecuador produces roughly 200,000 barrels a day, most of which is shipped to the U.S.

Protesters are demanding that foreign oil companies operating in the region finance infrastructure projects and more job opportunities, the

Wall Street Journal

reported. They also demand the renegotiation of contracts with foreign oil operators

EnCana

(ECA) - Get Report

,

Occidental Petroleum

(OXY) - Get Report

and the Brazilian oil company

Petrobras

(PZE)

to increase state participation.

"The events in Ecuador are underscoring the hot spots in South America," says Kevin Kerr, at Kerr Trading International. "We really didn't see much of a relaxation in prices, and oil still seems poised to reach the $70-a-barrel level."

Other reports of supply disruption came from Nigeria, where

Royal Dutch Shell's

( RD) 14,000-barrels-a-day facility has been shut for three days due to unrest among local communities.

Also supporting oil prices Friday were reports that three Katyusha rockets exploded in Israeli and Jordanian Red Sea port cities, apparently targeting two U.S. ships, the

USS Ashland

and the

USS Kearsage

. One Jordanian soldier was killed.

The Jordanian port of Aqaba, which was hit by two of the rockets, borders with Saudi Arabia.

"It's not surprising to see a price rally on a Friday in the summer, especially after heavy selling on Wednesday and Thursday," said Michael Fitzpatrick, energy analyst at Fimat USA. "I expect the selling to resume, however, next week."

Earlier this week, oil prices fell as two reports showed inflation on the rise in the U.S., possibly crimping economic growth and energy demand. The fears were reinforced after the American Petroleum Institute said domestic petroleum deliveries dropped 3% in July, the largest year-over-year drop in more than three years.

Meanwhile, Merrill Lynch has reportedly raised its previous long-term crude oil price target Friday to $42 a barrel. It said that while oil will average $56 in 2005, by the end of the decade prices will decline. The outlook differs from Goldman Sachs' report Thursday, which said oil prices would probably average $60 a barrel by the end of the decade.

In company news,

Oceaneering International

(OII) - Get Report

said it received a $13 million deal from

Newfield Exploration

(NFX)

. The technical services provider will supply Newfield with a steel tube umbilical, or equipment used for subsea well completions, for its Gulf of Mexico Wrigley field development located beneath 3,700 feet of water. Shares of Oceaneering rose 54 cents, or 1.3%, to $42.86.

Raymond James raised

Energy Transfer Partners

(ETP)

to a strong buy from outperform, and raised

Kinder Morgan Energy Partners

(KMP)

to outperform from market perform, saying both are undervalued. Shares of ETP rose $1.06, or 3%, to $35.38; KMP increased 80 cents, or 1.6%, to $51.04.

Among the major oil producers, shares rallied Friday. The Amex Oil Index was up 1.5%.

Exxon Mobil

(XOM) - Get Report

rose 1.3%,

ConocoPhillips

(COP) - Get Report

gained 1.8%,

BP

(BP) - Get Report

added 1.3%, and

Chevron

(CVX) - Get Report

increased 1.3%.

Shares of

Lufkin Industries

( LUFK), the oil service company, climbed 7.5% to $44.29 Friday.