Crude oil rose to a one-year high above $78 a barrel on Friday after data showed U.S. industrial production expanded in September, boosting optimism for an economic recovery.

Oil prices have surged 12.9 percent, or nearly $9 a barrel, in seven consecutive trading days since October 7.

U.S. industrial production rose in September for a third consecutive month, by 0.7 percent, Federal Reserve data showed Friday.

Increasing factory output stoked optimism that industrial demand for fuel may rise, prompting fuel stock drawdowns in the world's biggest energy consumer. Government data showed Thursday a 5.2-million-barrel drawdown in gasoline stocks last week, the biggest decline in over a year.

Bullish industrial data helped investors shrug off factors that typically pressure oil prices, including a dip in U.S. stocks Friday following disappointing earnings from General Electric , and a stronger dollar.

People think the financial supports are still there to lift oil to a higher level, said Tim Evans, analyst at Citi Futures Perspective in New York. The crude oil market is reacting to supportive data and willing to overlook anything that doesn't fit the picture.

U.S. crude oil futures rose by 95 cents a barrel to $78.53, their highest settlement price in a year.

Brent crude settled up 76 cents at $76.99.

The U.S. currency's recent plunge to a 14-month low against a basket of other currencies helped oil to rise 9.4 percent this week. The dollar gained Friday, although it lost some of its earlier strength in afternoon trade.

U.S. stocks also rebounded slightly from earlier lows in afternoon trade.

Unseasonably cold weather in the U.S. Northeast, and the specter of storms hitting the top regional consumer of heating oil over the weekend, also helped push up oil prices.

Two complex coastal storms are expected along the U.S. Mid-Atlantic and Northeast coast during the next few days, according to forecaster DTN Meteorlogix.

Oil had fallen earlier Friday, as some analysts questioned whether the commodity's recent rally was justified, with inventories of crude oil and refined products in the United States, the world's largest energy consumer, still above year-ago levels.

If you look at the stock situation you will not be buying. There is still an awful lot of stocks, Rob Montefusco, an oil trader with Sucden Financial in London, said.

U.S. crude and product stocks, excluding strategic reserves, remained above 1.1 billion barrels in the week through October 9, according to weekly Energy Information Administration data released Thursday. Stocks were up from year-ago levels of 976 million barrels.

(Additional reporting by Gene Ramos in New York, Ikuko Kurahone in London and Jennifer Tan in Singapore; Editing by Christian Wiessner)

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