Brent crude fell on Friday on concerns that demand for oil will be hurt by Europe's spreading debt crisis that also weakened the euro against the dollar. US oil prices rose after a choppy, holiday-shortened session that saw low-volume trading. A higher open for equities on Wall Street provided a lift for oil, but US stocks faded and finished lower a seventh straight session.
Both Brent and US crude posted their second consecutive weekly losses. The euro fell to more than seven-week lows against the dollar intraday, as disagreement on how to tackle the debt crisis drove borrowing costs to new euro-era highs and energy investors worried the problems will curb oil demand. Fuelling investor uncertainty was the disagreement among policymakers over how to resolve the crisis, with Germany opposed to joint eurozone bonds and a bigger role for the European Central Bank.
"There are talks and talks, but nothing happens," said Thorbjoern Bak Jensen, an analyst at A/S Global Risk Management Ltd US oil rallied and Brent pared losses due to Wall Street's higher open on bargain hunting and hopes that the holiday shopping season was off to a strong start. Stocks later closed lower for the seventh straight session as the uncertainty about Europe's crisis weighed.
Also seen limiting oil's slide were geopolitical tensions over Iran's nuclear program and Middle East unrest. ICE Brent January crude fell $1.38 to settle at $106.40 a barrel, after dipping under front-month Brent's 300-day moving average of $105.98. Brent posted a 1 percent loss for the week.
US January crude rose 60 cents to settle at $96.77 a barrel, having swung from $94.99 to $97.47. US crude posted a loss for the week of 64 cents. "Equities may have helped, but they faded and the market is balancing between negative Europe economy concerns versus worries about oil sanctions against Iran and what the repercussions from that will be," said Tom Bentz, director at BNP Paribas Prime Brokerage Inc in New York.
Brent's weakness pushed its premium to its US counterpart below $10 a barrel. Low crude trading volumes contributed to oil's price volatility, with many traders still out after Thursday's US Thanksgiving holiday and with markets closing early on Friday. Brent trading volume was 48 percent below the 30-day average and US crude volume was 57 percent below its 30-day average.
The possibility that European countries might stop buying Iranian oil was raised following a French government official on Thursday mistakenly suggesting Paris was about to unilaterally ban Iranian oil imports. That intensified expectations that European Union countries might consider a boycott of the Opec producer's oil sales to step up the pressure on Tehran over its nuclear programme.