Oil falls back as Europe concerns weigh

Oil fell on Friday and headed for a weekly loss as Europe's debt crisis continued to weigh on prices, while a drop below a key technical level by US crude added to the bearish sentiment. Brent crude oil futures settled lower on Friday on persistent concerns about the eurozone debt crisis following a warning from credit ratings agency Fitch that it may downgrade France and six other countries in the bloc.
US crude fell below its 300-day moving average of $93.20 after testing support in the area the previous session and earlier on Friday. Both Brent and US crude futures received a boost early from a weaker dollar and a higher open by US equities, which were lifted by a brighter US economic outlook. But the euro turned negative versus the dollar and stocks on Wall Street also -wobbled.
Oil prices have gyrated this week. Brent shot up to $111.10 on Tuesday on fears about restrictions or disruptions to the key Strait of Hormuz shipping lane and then plunged more than 4 percent on Wednesday in a broad commodities sell-off triggered by concerns over Europe and Opec's decision to target production of 30 million barrels of oil per day. In London, ICE Brent for February delivery settled at $103.35 a barrel, dipping 25 cents or 0.24 percent. For the week, front-month Brent fell $5.27 or 4.85 percent, down for the second week in a row.
On the New York Mercantile Exchange, January crude settled at $93.53 a barrel, falling 34 cents, or 0.36 percent, after trading between $92.52 and $94.79. For the week, front-month crude fell $5.88, or 5.9 percent, extending losses to a second straight week.
Brent's premium against US crude narrowed to under $10 a barrel on Friday, after widening to near $12 a barrel intraday on Thursday. Crude trading volumes remained anemic, with both Brent and US volumes 53 percent under 30-day averages in afternoon trading in New York.
"Volumes are likely to be decreasing slowly as we get nearer to Christmas," said Commerzbank's Weinberg. "During this period, because of the lower volumes, the market is more susceptible to moves that aren't fundamentally sound. We may see some further volatility." Helen Henton, head of commodities research at Standard Chartered, remained bearish on oil going into the first quarter of 2012, citing a slowdown in the global economy.