Oil stocks such as Shell, powered by lofty crude prices, helped keep Britain's blue chip index near 19-month highs on Friday, as investors piled back into the recently under-performing sector.
With Brent crude prices near 11-month highs and the dollar staging a recovery from multiyear lows against a host of currencies, the FTSE's seventh-largest stock Shell was up 2.3 percent and BP, its third-largest, rose 1.6 percent.
"We believe oils should outperform the market. Opec want to receive the same revenue stream they had before the dollar went down so they will try and keep oil prices high," said Nigel Cobby Managing Director European equities at J.P. Morgan.
"We could see oil prices averaging over $30 a barrel in 2004 if that happens the oil companies will be making huge amounts of money, dwarfing the banks, and generating huge amounts of free cash flow," he said.
By 1529 GMT the FTSE-100 index was up 15.5 points to 4,531.1, off its earlier peak of 4,549.5, its highest reading since July 10, 2002, as Wall Street went into reverse.
Banking shares also surged with HBOS up ahead of results next week. Britain's biggest mortgage lender's full-year pre-tax profit is forecast to jump 28 percent to 3.72 billion, according to a Reuters poll of analysts.
Dealers and analysts forecast the FTSE making further headway over the coming weeks and months as confidence in the health of UK Plc grew. They said the index could even hit 5,000 points.
Among Friday's decliners, Cable & Wireless slid after its joint broker issued a note saying the shares were fully valued. An ABN Amro spokesman said the bank had put out a research update to clients following a meeting with C&W CEO Francesco Caio.
Defence group BAE Systems was the biggest blue chip loser, down 4.5 percent at 178-1/2p with dealers reporting that investors were locking in profit after an advance which has taken the shares up from 157p since the middle of last week.
Shares which have been buoyant this week after trading results went ahead again, with news and information group Reuters up 2.5 percent and publisher Reed Elsevier four percent higher. Reed Elsevier shares were also aided by Morgan Stanley raising its price target.
Shares in British oil and gas firm BG Group hit a 21-month high after recent strong results, a positive note from Goldman Sachs on Thursday and on the back of Brent crude prices.
In the mid-cap arena, technology firm ARM Holdings slid after a fall in US technology stocks overnight continued.
Shares in Britain's biggest regional brewer Wolverhampton & Dudley jumped after a positive broker note from Altium Securities, dealers said.
Shares in British engineering firm Morgan Crucible reversed yesterday's slide, induced by a dilutive rights issue, and were up 5.6 percent.
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