Oil edged up Friday in low-volume trading, on pace to post weekly gains and supported by concerns about potential supply disruptions in Iran and Iraq and by signs of a strengthening US economy. Oil also found support from stronger equities on Wall Street, with the S&P 500 index breaking through its 200-day moving average after turning positive for the year in a four-day rally on the recent better-than-expected economic data.
"It's very thin trading, but stronger equities are helping oil stay up today," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut. Geopolitical uncertainty, especially in Iraq and Iran, also kept investors focused on potential threats to supply. The government said new US single-family home sales rose to a seven-month high in November, with the supply on the market at the lowest in 5-1/2 years.
The home-sales report and Thursday's data showing a fall in initial jobless claims last week helped offset a separate report on Friday showing consumer spending fell for a second straight month. Brent February crude rose 28 cents to $108.17 a barrel by 12:57 pm (1757 GMT).
US February crude rose 62 cents to $100.15 a barrel, having reached $100.23. Crude trading volumes were very thin ahead of the holiday weekend, with US dealings 83 percent below the 30-day average and Brent 74 percent under its 30-day average. The spread between Brent and US crude narrowed to as low as $7.60 a barrel. The US Congress passed legislation containing a provision aimed at forcing a quick decision by President Obama on the Keystone XL pipeline.
Analysts say the pipeline, from Canada to refinery and port facilities in Texas, would ease a supply glut at the Cushing, Oklahoma, delivery point for the US crude contract that has hemmed in prices for the US benchmark crude. For the week, Brent was on pace to post a 4-percent gain and US crude a more than 6 percent weekly gain, snapping a string of two weekly losses.
Iran's navy will launch a 10-day war game in the Strait of Hormuz on Saturday, state TV said, raising concern about a possible closure of the key oil shipping route. In Iraq, a wave of bombings that killed in Baghdad on Thursday pointed to a deteriorating security situation just days after the last US troops left the country. "There are lots of reasons not to carry a short position into the holidays," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis.