Updated from 2:24 p.m. EDT

Front-month crude cleared $75 a barrel Friday, as the newly benchmarked June contract continued to reflect concerns that an escalating standoff with Iran will slash world crude inventories.

June crude closed at an all-time high of $75.17 a barrel, up $1.48 from Thursday, when the May contract expired at $71.95. Longer-dated crude futures are currently trading above near-term contracts as traders bet on future supply constraints and reckon that the potential for political disruption grows over time.

This week, oil prices topped the record highs last seen in September after hurricanes decimated much of the Gulf Coast's petroleum industry thanks largely to the escalating conflict with Iran.

Iran has refused to budge on uranium enrichment and has vowed to expand its efforts despite the West's threats of economic sanctions and military strikes. Tehran now has one week until the U.N. Security Council meets to discuss actions against the world's fourth-largest crude producer. The U.S. has vowed to press for economic sanctions, while Russia and China have opposed them.

Diplomats from Germany, France, Britain, Russia and the U.S. met with Iranian officials in Moscow this week, but the talks ended inconclusively. A State Department spokesman said momentum was gaining to impose sanctions on Iran, according to reports.

Crude prices have also been supported by ongoing supply cuts in Nigeria, where militants have attacked oil installations to pressure the government for a share of the country's oil revenue. Daily output is down around 25%, or 640,000 barrels, this year.

Royal Dutch Shell

( RDS-A) officials said Friday that security problems have stalled the company's efforts to restart production of 455,000 barrels.

"The oil market in particular is still tight, with spare capacity below the historic average and much uncertainty over the security of production from a number of different countries, including Iran, Iraq and Nigeria," Lord John Browne, BP's chief executive, said in a speech at the company's annual shareholders meeting on Thursday.

Crude prices won't get any relief from the Organization of the Petroleum Exporting Countries, which pumps 40% of the world's crude, any time soon. OPEC ministers have said in recent days they are powerless to bring down high oil prices because the group is already pumping at full capacity. In March, the group pumped 29.9 million barrels per day, an increase of 100,000 barrels from March.

A boost in production wouldn't make much difference because crude supplies are high.

"OPEC can deal with issues it can control but ... we can't do anything about the politics in the world," Algerian Oil Minister Chakib Khelil told

Reuters

at a larger energy conference in Qatar on Friday. "The market would see through that. If we do something, it has to be credible. Why should we hide the truth?"

Although crude prices have soared this week, there are plenty of domestic supplies to cover any temporary problems. Inventories are nearly 7% above last year, thanks largely to refinery outages. Many refiners are slowly switching over to new fuel requirements that phase out ethanol and cleaner blends of gasoline for the summer driving season. Crude is processed into refined products, such as gasoline.

The energy markets are afraid that gasoline inventories, which are now 5% below those of a year ago, will continue their decline as demand heats up. Wholesale gasoline picked up 2 cents to settle at $2.23 a gallon.

Warm weather has cut heating demand, boosting stockpiles and generally driving down prices. Natural gas fell 8 cents to $7.98 per million British thermal units, but heating oil rebounded and closed up 2 cents at $2.07 a gallon. But prices could quickly rebound if the summer is very warm and consumers crank up their air conditioners, drawing down supply levels.

"If storage is full very early, then there may be some softness for a while, not long, but for awhile," Andrew Gould, chairman and chief executive officer of Schlumberger, said in a conference call this morning.

In trading Friday, shares of

Schlumberger

(SLB) - Get Report

were dropping 26 cents to $67.81 after first-quarter earnings beat analysts' expectations, with net income soaring 38% to $722.5 million, or 59 cents a share. Sales hit $4.24 billion, up from $3.16 billion. Analysts had expected earnings of 55 cents a share on revenue of $4.15 billion.

Higher demand for drilling services and commodity prices were behind the rise.

In a related announcement,

Baker Hughes

(BHI)

said it would sell its 30% stake in WesternGeco, a seismic company, to Schlumberger, its partner in the joint venture, for $2.4 billion in cash. Baker Hughes will use the money from the deal, which is expected to close by the end of this month, to repurchase stock up to $1.8 billion.

Shares of the oil-services firm were rising $2.58 to $77.38.

Petrohawk Energy

(HAWK)

shares were dipping 68 cents to $12.90 after the oil and gas producer said it will buy

KCS Energy

( KCS) for $1.6 billion in cash and stock. The deal brings together two mid-cap companies that both operate in east Texas and northern Louisiana.

The combined company will have about one trillion cubic feet of proven reserves of oil and gas. About 82% will be in natural gas. Current production is 291 million cubic feet equivalent.

The oil and gas producer will be worth $3.7 billion after the merger and will retain the same name and Houston headquarters.

KCS shareholders will receive $9 per share in cash and 1.65 shares of Petrohawk stock for each KCS share they own. On Thursday, KCS closed at $28.66, while Petrohawk settled at $13.18.