Oil prices rose on Thursday when a trade is not stable because of the weakening dollar and the euro rallied on news the euro zone officials have agreed the principal of a new program for Greece's debt-laden.

News of an explosion and fire at Chevron's (CVX.N) refinery at Pembroke in Wales also provided a lift. [ID:nLDE7511ZC]

"It's another bail out boost. The dollar also got hammered by the Moody's warning about U.S. default and the Pembroke fire definitely provided some lift," said Phil Flynn, analyst at PFGBest Research in Chicago.

Brent led the recovery after Brent and U.S. crude contracts felt pressure earlier as investors reacted to rising U.S. inventories and weighed OPEC sources' remarks indicating the group could hike output targets at a meeting next week in Vienna.

Brent LCOc1 crude for July delivery rose $1.01 to settle at $115.54 a barrel, rallying after being pressured by the U.S. oil inventory data and pushing the Brent premium to U.S. crude CL-LCO1=R to over $15 a barrel.

U.S. July crude CLc1 edged up 11 cents to settle at $100.40 a barrel.

"Looks like Brent is following the euro rally on the Greece agreement in principle on dealing with their debt. There are still problems with Forties system also keeping North Sea firmer," said Tom Bentz, director of BNP Paribas Commodities Futures Inc in New York.

Senior euro zone officials have agreed in principle on a new three-year adjustment program for Greece to run until mid-2014 and involve increased external funding, a source close to the negotiations said. [ID:nATH006131]

The news helped push the euro scale a one-month peak against the greenback and the dollar also felt pressure after ratings agency Moody's Investors Service warned there is a small but rising risk of a short-lived default by the United States if the nation's debt limit is not increased in coming weeks. [USD/] [ID:nN02274698]

A weaker dollar can lift dollar-denominated oil by attracting investors to commodities as a hedge against inflated currencies and by making oil less expensive to consumers using currencies other than the dollar.

Premiums for North Sea Forties crude oil rose on Thursday on production problems at offshore oilfields combined with steady demand from European refiners. [ID:nLDE7511UQ]


key economic indicators


euro zone debt struggle


Middle East unrest

OPEC MULLS RAISING TARGETS

Oil investors eyed comments from OPEC sources, who said the group could lift production targets by up to 1.5 million barrels per day (bpd) to help bring down high fuel costs, though one delegate said a 1 million-bpd hike would be the likely outcome. [ID:nL3E7H20QC]

"Oil prices are too high. $100 oil is scaring people," one delegate said, adding a rise of 1 million bpd in OPEC's output target would result in only a small increase in actual oil supply from the group.

Ali Al-Naimi, top OPEC producer Saudi Arabia's oil minister, was cautious, repeating previous comments that the group would lift production if there was more demand for crude. [ID:nWSF010384]

"If this is 1 million bpd on top of the targets from over two years ago, then it's meaningless. If it's 1 million bpd above current production levels, then it's exactly what the market needs," said David Wech, analyst at JBC Energy in Vienna.

RISING U.S. INVENTORIES

The U.S. Energy Information Administration's weekly report indicated no shortfall of oil in the world's top consumer, as the nation's inventories rose last week and put seasonal crude inventories at the highest level since 2006. [EIA/S]

U.S. crude stockpiles rose 2.88 million barrels to 373.8 million in the week to May 27, against expectations stocks would be lower.

Gasoline inventories jumped 2.55 million barrels, more than expectations, while distillate stocks fell just under a million barrels, more than forecast.

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China oil demand seen rising 10.9% in March compared with the previous year but down 4.0 percent from February as refiners produced less fuel and falling net imports.

The following table shows implied oil demand for March, net imports and
output. All volumes are shown in barrels per day.

Implied     Percent change on:        12-month

demand     previous       year        moving
(Net imports + output)                         month         ago        average
Crude ("Crude supplied")       9,162,450        -1.8         3.2      8,990,501
Gasoline                       1,683,118        -6.1         8.3      1,688,526
Naphtha                          642,156        -7.8        11.9        672,328
Kerosene                         302,411       -29.6        10.9        390,356
Diesel                         3,288,831        -7.8         9.9      3,286,604
Fuel oil                         720,704        -0.4         7.7        637,567
Lubricating oil                  250,417        22.9         5.4        212,206
LPG                              699,783        -6.3       -15.8        748,166
OVERALL OIL DEMAND             9,146,846        -4.0        10.9      8,944,453

Net       Percent change on:        12-month

Imports     previous       year        moving

month         ago        average
Crude                          5,024,057        -3.0         2.7      4,865,666
Gasoline                        -127,908         5.1       -21.1       -120,331
Naphtha                           61,647        16.7        94.6         52,059
Kerosene                         -69,982      -343.1       -14.4         15,873
Diesel                           -40,495    127093.5       -15.8        -44,700
Fuel oil                         355,343        13.6        29.2        260,420
Lubricating oil                   63,901        22.7       349.8         45,345
LPG                               34,841        31.3       -11.1         72,312
Products subtotal                277,346       -21.1       146.1        281,951

Percent change on:        12-month

Output      previous       year        moving

month         ago        average
Output (BARRELS PER DAY)
Crude                          4,138,394        -0.2         3.9      4,124,836
Gasoline                       1,811,026        -5.4         5.5      1,808,856
Naphtha                          580,510        -9.8         7.1        620,269
Kerosene                         372,394        -7.0         5.1        374,483
Diesel                         3,329,326        -6.7         9.5      3,331,304
Fuel oil                         365,361       -11.0        -7.2        377,147
Lubricating oil                  186,516        22.9         4.3        162,750
LPG                              664,942        -7.7       -16.0        675,854
Refinery runs                  8,869,500        -3.4         9.0      8,662,502

* Reuters calculates China's oil demand by adding the total amount of crude refined during the relevant period, as reported by the National Statistical Bureau, to net imports of major oil products reported by Customs.

This strips out any changes in crude oil inventories, which are rarely
reported in China.

It also does not take into account the 1-2 percent loss in overall product volume created by the refining process. Nor does it include the small amount of crude that is directly burned as fuel at oil fields or power stations or that is used by small, unreported 'teapot' refineries.

Demand by product is calculated by the refinery output for each product plus net imports.

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Gold and silver on the Comex division of the New York Mercantile Exchange underwent a noteworthy correction on Thursday as the dollar strengthened, oil prices dropped and fund managers saw an opportunity to book profits.

Silver posted the biggest loss with the May contract recently off $1.167, or about 3 percent, at $34.88 an ounce in New York. On Tuesday, the grey metal touched a 31-year high of $36.55.

Meanwhile, gold futures for April delivery were down $22.50, or 1.6 percent, at $1,407.10 an ounce. Trade has ranged from $1,403 to $1,431.80.

"The metals have looked a little frothy, particularly silver. Today's sell-off is dollar oriented mostly," said Sterling Smith, an analyst with Country Hedging, who added the European currency chart is looking a little nervous due to the re-emergence of sovereign-debt worries.

The euro fell about 1 percent to 1.3788 against the dollar after Moody's downgraded Spain's credit rating to Aa2 from Aa1 and warned that additional cuts could be forthcoming. On Monday, the rating agency slashed Greece credit by three notches.

Standard Bank said in a note that the debt crisis in eurozone peripherals is moving more into the focus of market players again.

"Even so, a rate hike by the ECB in April is virtually certain although the debt crisis is rekindling. Rising interest rates will lead to higher opportunity costs for holding gold and therefore make gold less attractive for investors," the bank analysts said.

Falling crude oil prices also placed some downward pressure on the precious metals complex. Light sweet crude (WTI) oil futures on the Nymex were recently down $2.54, or about 2.5 percent, at $101.84 per barrel.

While the chaotic situation in Libya is far from resolved, the energy markets on Thursday reacted to news that China recorded an unexpected trade deficit of $7.3 billion in February - its highest in seven years.

Also of note, silver's big loss on Thursday means that the gold/silver ratio has moved to the more manageable number of 40.3:1 from 39:1 on Tuesday.

"Silver had overheated by a large amount and the gold/silver ratio had gotten out-of-whack. Although, we're still going to have to take that ratio back to 43.5-44:1 to get the precious metals back healthy again," Smith said.

"Silver is a very polarized market. We saw silver run up excessively and now we're seeing it sell-off a little bit excessively as well," Smith said.

As for the other precious metals, platinum for April delivery was down $39.60 at $1,762.40 an ounce, while the June palladium contract fell by $15.10 to $766.55 an ounce.

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Gold fell from record highs due to profit taking by investors after U.S. crude oil prices fell sharply due to worries Libyan leader Muammar Gaddafi to seek opportunities to exit the country safely.

Silver gained 1.5 percent, having earlier touching a 31-year high on strong physical demand and short-term supply tightness. Silver’s outperforming over bullion sent the gold-silver ratio below a key psychological level.

“It’s a bit of profit-taking right now. The Libya situation is so fragile at the moment, and there’s a lot of speculation Gaddafi will leave, or whether his forces are retreating,” said Phillip Streible, senior market strategist with MF Global’s Lind Waldock.

Oil prices fell sharply from earlier peaks, with traders and brokers citing rumors of a deal involving Gaddafi leaving Libya. The rumors appeared linked to an unsourced report in an Arabic-language newspaper, trade sources said, but this could not immediately be verified.

Earlier in the day, Reuters reported that a leading member of Libya’s ruling establishment had appealed to rebel leaders for dialogue, in the clearest sign yet Gaddafi may be ready to compromise with opponents challenging his rule.

Spot gold hit a record $1,444.40 an ounce as violence flared in Libya and after a downgrade of Greece’s credit rating by Moody’s reignited euro zone sovereign debt worries, which helped fuel a bullion rally last year.

Gold rose 35 cents to $1,432.20 an ounce by 1 p.m. EST, while U.S. gold futures for April delivery rose $3.80 an ounce to $1,432.60, largely tracking oil’s pullback. Gold prices in London had risen further after U.S. futures settled on Friday, resulting in a sharper gain in U.S. prices on Monday as they caught up.

Silver gained 1.2 percent to $36.02 an ounce. The metal rose to its highest since early 1980 in earlier trade at $36.70 an ounce.

The gold/silver ratio fell below 40:1 for the first time since February 1998, the weakest since billionaire Warren Buffett bought 130 million ounces of silver between 1997 and 1998.

Gold was dragged lower as the increase in the price of oil weighed on both European and U.S. stocks, and as the euro fell against the dollar after having earlier hit a four-month high as expectations of a euro zone interest rate hike next month faded.

RISING TENSIONS UNDERPIN

Violence across North Africa and the Middle East has boosted gold’s appeal as a protection from risk in recent weeks.

“The geopolitical risk premium is clearly reflected in the gold price,” said Robin Bhar, an analyst at Credit Agricole. “The violence (has) intensified which does prompt suggestions of civil war in Libya.”

Last week, bullion notched its fifth consecutive weekly gain on fears that Libya’s escalating unrest could spread across the Arab world.

Saudi security forces detained at least 22 minority Shi’ites who protested last week against discrimination, activists said on Sunday, as the kingdom tried to keep the wave of Arab unrest outside its borders.

Platinum dropped 1.6 percent to $1,811.49 an ounce, while palladium lost 2.6 percent to $788.47.

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Crude-oil futures ended moderately higher Friday, as investors remained concerned about unrest in Libya and other Middle Eastern and North African countries, but gains were limited by assurances that other oil-producing nations could make up for production losses.

Light, sweet Crude for April delivery (CLJ11 98.23, +0.60, +0.61%) added 60 cents, or 0.6%, to settle at $97.88 a barrel on the New York Mercantile Exchange.

Never mind the relatively lackluster Friday: oil gained 14% this week, its biggest weekly percentage increase since January, 2009. Oil has settled higher in six out of the last seven sessions.

The week included a rollover from the March contract to the April contract. Weekly gains in terms of the April contract reached 9.1%.

Concerns about supplies in Libya due to the country’s unrest and fears of contagion to other Middle Eastern and North African nations roiled markets this week.

Other energy products such as gasoline posted fresh multi-year highs.

The front-month April Brent crude contract at London’s ICE also settled higher, up 78 cents, or 0.7%, to trade at $112.14 a barrel.

Some renewed buying interest in oil as well as other commodities such as gold came later in the session, as some traders positioned ahead of the weekend, trying to avoid staying out of the market ahead of the weekend –- with its potential for more unrest and laden with uncertainties.

Oil traded slightly lower for most of the session.

“We seemed to have wakened up to a calmer atmosphere in the market,” said Matt Smith, an analyst with Summit Energy in Kentucky.

While Libya’s production is compromised, traders have taken “comfort” from statements by the Saudis and organizations such as the International Energy Agency about spare capacity and use of emergency stockpiles, he added.

The market “appears to be taking the loss of most Libyan barrels as a given but does not expect further problems,” JBC Energy analysts said in a note to clients Friday.

Other analysts have cautioned, however, that Saudi Arabia’s heavier, sour crude oil — more costly and time-consuming to refine — is not a perfect substitute for Libya’s lighter, sweeter product.

“Complex refineries with ample coking and sulfur recovery capacity will fare better in this environment than those geared to running the higher-grade feed. However, from a global fuel supply perspective, we think there is plenty of spare refining capacity right now to convert additional sour barrels into products,” Tim Evans, an analyst with Citigroup’s Citi Futures Perspective wrote in a note to clients earlier this week.

Crude futures surged in recent sessions to levels not seen since the second half of 2008, breaching the key $100-a-barrel level, but ended on a weaker note Thursday.

“There is still a lot of nervousness in the market, but it’s not as elevated as yesterday,” said Arne Lohmann Rasmussen, a commodity analyst at Danske Bank in Copenhagen.

Futures on other energy products traded higher on Friday, with natural gas the star of the day on the back of gains of 3.4%.

Natural gas for April delivery (NGJ11 4.02, +0.13, +3.42%) , the new front-month contract, added 13 cents to $4 per million British thermal units.

That was natural gas’s highest settlement since Feb. 9. On the week, the fuel rose 3.2%.

Gasoline for March delivery (RBH11 2.74, +0.03, +1.26%) advanced 2 cents, or 0.8%, to $2.74 a gallon. That was gasoline’s highest finish since Sept. 12, 2008.

Gasoline gained 7.5% this week, the biggest weekly gain since December.

March heating oil (HOH11 2.94, +0.05, +1.86%) advanced 5 cents, or 1.9%, to $2.93 a gallon, putting weekly gains for heating oil at 8%, the largest weekly advance since October, 2009.

The settlement was heating oil’s highest since Sept. 26, 2008.
Coping mechanism

Libya’s crude exports have come to a virtual halt because of reduced production and a lack of workers at ports, as well as on security concerns, Reuters reported on Friday. Reuters also reported the Saudis had already increased their oil production by 8% to make up for Libya’s virtual halt.

In a statement released Thursday, the Paris-based International Energy Agency said it was in close contact with the Organization of the Petroleum Exporting Countries cartel and major producer countries.

The IEA also said that it is “always ready to immediately activate” its existing response mechanism if needed and that IEA members collectively have 1.6 billion barrels of emergency oil stocks at their disposal.

Danske Bank’s Rasmussen pegged the risk premium currently seen in oil prices at $15 to $20 a barrel and said it’s unlikely to be eroded any time soon, pointing to fears that unrest could spread even if the Libyan situation is resolved and oil production resumes.

“The world is a bit different than it was a month ago,” he said.

Along these lines, Saudi Arabia announced a $36 billion package of new programs and benefits for its citizens Thursday and Algeria officially lifted political restrictions imposed in 1992.

Saudi leaders’ decision to commit to spending on housing, education and social welfare will “buy the government some more breathing space,” said economists at Capital Economics.

In any event, “most of Saudi Arabia’s population is conservative and appears to favor political and economic stability rather more than reform,” they added.

For Algeria, the country’s experience of civil war in the 1990s “makes people there even more wary of a descent into the chaos now seen in neighboring Libya,” Capital Economics told clients.

By Claudia Assis and William L. Watts, MarketWatch
Claudia Assis is a San Francisco-based reporter for MarketWatch. William L. Watts is a reporter for MarketWatch in London. Sarah Turner in Sydney contributed to this report.

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Gold on the Comex division of the New York Mercantile Exchange regained some of its footing on Friday after slipping overnight due to easing oil prices, benefitting when US fourth-quarter GDP revision came in below expectations.

Gold futures for April delivery were recently trading down $8.20 at $1,407.60 per ounce in New York.

But it had fallen as low as $1,400.10 in electronic after-hours trade soon after oil dropped by $3 per barrel based on news that Saudi Arabia will make up for any shortages resulting from civil unrest in Libya.

"Gold is lacking direction as traders are navigating some strong cross-currents," a US-based fund manager said.

"There's now a clear consensus that [Libyan ruler] Kaddafi’s reign is far past its expiration date and should end before he has the opportunity to so something truly insane,” he said. “This, along with the Saudi's pledge to support the supply side, has allowed crude prices to stabilise and has coaxed some risk back into to the market.

But there is still some real concern that the protests could spread across the region so safe-haven is still alive and well, he added.

Additionally, Comex gold has rallied by about six percent this month and climbed within about 1.5 percent of the all-time contract high of $1,432.50, which was set on December 7.

"The air was getting pretty thin, so there's clearly some element of end-of-the-week profit-taking," the fund manager said. “We're going to experience a slight lull and may even see a mild correction before making a run towards the record in the coming days and weeks.”

Nevertheless, gold did find some support this morning after the US government revised its fourth-quarter GDP down to 2.8 percent - below a predicted 3.3 percent revision.

"Once news came out US GDP missed the mark, gold predictably firmed by a couple dollars. That news alone should allow the market to end the week above $1,400," the manager said.

In other precious metals, Comex silver for May delivery was down 32 cents at $32.86 per ounce. Trade has ranged from $32.06 to $33.13.

Platinum for April delivery on the Nymex was up $10.20 at $1,797.00 per ounce, while the March palladium contract was up $7.50 at $785.25.

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(Reuters) - North North Sea Brent crude oil futures jumped back above $100 a barrel on Monday on worries unrest in Egypt could spread to other parts of the Middle East and north Africa, disrupting energy supplies.

A senior Kuwait official said over the weekend oil prices could exceed $110 per barrel if the turmoil in Egypt continued, while Venezuela said prices could more than double to $200 if the Suez Canal closed.

Iran, which holds the rotating presidency of the Organization of the Petroleum Exporting Countries, said it saw no need for an emergency OPEC meeting even if oil prices hit $120.

"There is a lot of uncertainty over Egypt. We do not know what is going to happen there and the worry is that contagion will spread, destabilizing other countries," said Christophe Barret, oil analyst at French bank Credit Agricole.

"Of course everyone is worried -- the Middle East is such a big source of energy."

Commerzbank analysts said oil prices remained "well protected on the downside" "on the back of continued protests in the Middle East."

"The unrest in Egypt has also had an impact on the behavior of speculative financial investors, who are increasingly betting on rising oil prices again amid the uncertainty about possible effects on oil supply," Commerzbank said in its daily note.

ICE Brent crude oil futures for March rose $1.07 to a high of $100.90 before slipping back to around $100.50 by 1035 GMT. On February 3, Brent reached an intra-day high of $103.37, its highest since September 2008.

INVENTORIES

U.S. crude futures were more restrained as investors looked past the political crisis in Egypt and took note of high oil inventories, particularly in the U.S. Midwest and Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange's crude futures contracts.

U.S. crude for March was up 2 cents at $89.05 a barrel by 1035 GMT.

Opposition groups including the banned Muslim Brotherhood held talks with the government on Sunday to resolve Egypt's political crisis, but said their core demand for the removal of the president had not been met.

Demonstrators in central Cairo's Tahrir Square, focal point of an uprising that has rocked the Arab world and alarmed Western powers, said they would intensify their two-week battle to oust the president who has vowed to stay on until September.

What really worries traders is that unrest in Tunisia and Egypt could fuel similar protests in bigger oil producers such as Libya -- or even Saudi Arabia, creating massive uncertainty over oil supplies.

But there is no sign of a physical shortage of oil and global stocks are high by historical standards.

Domestic U.S. crude stocks rose 2.59 million barrels to 343.16 million barrels in the week to January 28, data from EIA showed.

Egypt controls the Suez Canal and the Suez-Mediterranean (SUMED) oil pipeline, which together moved over 2 million bpd of crude and oil products in 2009.

More than 34,000 vessels passed through the canal in 2009, of which nearly 2,700 were oil tankers carrying 29 million tonnes of oil, according to the U.S. Energy Information Administration.

Venezuela's oil minister Rafael Ramirez, who is usually hawkish on prices, said on Friday OPEC would call an emergency meeting if the canal closed.

"There is sufficient oil (in the market) and there have been no interruptions, but if they close Suez, that could take the oil price to $200," he told reporters.

OPEC members will meet consumers at an energy conference in Riyadh on February 22 and are expected to talk informally about output levels.

(Additional reporting by Patryk Wasilewski in London and Seng Li Peng in Singapore; editing by Keiron Henderson)

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Oil prices fell nearly 2 percent on Friday after an unfounded report about a possible announcement from Egypt set off speculation that President Hosni Mubarak could step down shortly, sparking profit-taking from which the market failed to recover.

Prices pulled back from the day's lows as it became clear there was no imminent news from Egypt, but Brent still settled below $100 a barrel for the first time in a week as traders latched onto the rumor as an excuse to sell.

Weak U.S. nonfarm payrolls data and modest gains in the dollar also pressured oil.

In London, ICE Brent crude for March fell $1.93 to settle at $99.83 a barrel, off a $102.48 intraday peak, logging its biggest daily percentage decline since mid-November. It managed a 41-cent gain on the week.

U.S. crude for March delivery fell $1.51 to settle at $89.03 a barrel, managing to bounce from an $88.45 low hit during the speculative sell-off, just above the week's nadir. U.S. crude ended down 31 cents on the week.

"The expectation that some resolution was coming flushed a lot of length out of the market," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Egyptian unrest had helped drive Brent above $100 for the first time since 2008, but some traders said a correction was due as there was little sign of the turmoil affecting nearby oil producers or disrupting Suez Canal transport.

"The trade finished on a weak note as shorts were apparently emboldened by Brent's drop back below the $100 mark," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.

RATTLED BY RUMOR

Traders said the rumor seemed to stem from a brief report on U.S. television channel CNBC, but several hours later there was no news on Egyptian TV about any announcements or transition of power. Gold edged down on the report, but foreign exchange and equities markets were unaffected.

Egypt's prime minister said it was unlikely the president would hand presidential powers to his newly appointed deputy, while hundreds of thousands of Egyptians marched peacefully in Cairo to demand an immediate end to Mubarak's 30-year rule.

Investors will continue to eye the region after demonstrations this week in Yemen and Friday's protests in Jordan, where demonstrators said King Abdullah's government reshuffle did not meet their calls for political reform.

They will also be looking for any signs that OPEC could move to damp down triple-digit prices by pumping more crude, something price hawks such as Venezuela say is unnecessary.

"There is sufficient oil and there have been no interruptions, but if they close Suez, that could take the oil price to $200," Oil Minister Rafael Ramirez told reporters.

U.S. EMPLOYMENT REPORT MIXED

Earlier, the January jobs report from the United States showed that nonfarm payrolls grew by only 36,000, well below forecasts for a rise of 145,000. The unemployment rate fell to its lowest since April 2009.

The tepid job growth was blamed on snow and weather conditions affecting hiring.

The dollar rose against the euro and a basket of currencies .DXY, helped by the drop in the jobless rate.

A stronger dollar can pressure dollar-denominated commodities such as oil because consumers using other currencies must pay producers more, curbing demand, while the greenbacks paid to producers rise in value.

(Additional reporting by Gene Ramos in New York, Zaida Espana in London and Alejandro Barbajosa in Singapore; Editing by Dale Hudson)

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Oil prices jumped more than 2 percent on Friday as investors reacted to accelerating growth in the United States in the fourth quarter of 2010 and increasing unrest in Egypt.

Protests in Egypt and the government's response intensified, making investors more wary about the unrest.

Earlier, oil prices received a boost from news that the U.S. economy gathered speed in the fourth quarter, fueled by the biggest gain in consumer spending in more than four years and strong exports.

"There is growing concern about the situation in Egypt and Yemen and there may be worry about not going into the weekend being too short," said Phil Flynn, analyst at PFGBest Research in Chicago.

U.S. crude oil for March delivery rose $2.25, or 2.6 percent, to $87.89 a barrel at 11:35 a.m. EST (1635 GMT).

In London, ICE Brent crude for March rose $1.05 to $98.44 a barrel, reaching $98.95 earlier.

The smaller gains squeezed Brent's premium over its U.S. counterpart, which had stretched to more than $12 per barrel, its widest since January 2009.

Total U.S. crude volume was above 822,600 lots traded just after 11:30 a.m. EST (1630 GMT), according to Reuters data, 19 percent above the 250-day average and already surpassing Thursday's 789,077-lot total.

Total Brent trading volume was above 387.000 lots traded, according to Reuters data, 1.5 percent above the 250-day average.

(Additional reporting by Gene Ramos in New York and Christopher Johnson in London; Editing by David Gregorio)

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Crude oil prices fell on Friday as traders speculated about whether China may impose more restrictions to control the growth of its economy, and looked for more signs that the US economy is headed for better days.

Benchmark oil for March delivery fell 48 cents to settle at $US89.11 a barrel on the New York Mercantile Exchange.

Oil and other commodities have taken a hit from news that China's economy defied expectations to speed up in the fourth quarter while inflation remained elevated.

Traders speculated that means China's government will take further measures to control cost of living increases. China has had a robust appetite for commodities from oil to soybeans as its economy has boomed in the past year.

Oil prices were restrained by the Energy Department's weekly report that showed growing US stockpiles of oil, gasoline and distillates, which include heating oil and diesel fuel. All are higher than the five-year average, an indication that energy demand remains tepid.

In other Nymex trading, heating oil rose 2.76 cents to settle at $US2.6508 a gallon, and gasoline added 3.64 cents to settle at $US2.4589 a gallon. Natural gas for March delivery gained 5.1 cents to settle at $US4.743 per 1,000 cubic feet.

In London, Brent crude rose $1.02 to settle at $US97.60 a barrel on the ICE futures exchange.

PRECIOUS METALS

Gold prices fell for a second day on Friday as a stronger appetite for riskier assets such as equities and an improving economic outlook diminished safe-haven buying, more than offsetting a weaker dollar.

Bullion notched a third consecutive weekly loss, its longest since July, and that called into question the metal's lengthy bull run due to signs that the economic recovery is taking hold and as fears about an European debt crisis have subsided for now.

Spot gold fell 0.2 per cent to $1,343 an ounce by 2 pm EST (1900 GMT). US gold futures for February delivery settled down $5.50 at $1,341 an ounce.

Bullion hit a low of $1,337.50, their weakest price since Nov 18, as financial markets opened in New York. US traders cited an increase in margin requirements for precious metals futures as a reason for the decline.

Silver inched up 0.2 per cent to $27.53 an ounce.

The gold-to-silver ratio - the number of ounces of silver needed to buy an ounce of gold - rose back towards 50, its highest level since late November, as some traders believed gold is becoming increasingly expensive relative to silver.

Friday's turnover was modest as COMEX gold and silver futures volumes on the New York Mercantile Exchange were largely in line with their 30-day averages.

Gold's slide was limited on Friday by a retreat in the dollar to two-month lows versus the euro, with the European single currency reaching its highest level since late November, helped by improving confidence in region.

Silver prices had earlier hit a seven-week low at $27.10 an ounce, pressured by a further outflows from the world's largest silver-backed exchange-traded fund, the iShares Silver Trust.

Holdings of the trust fell by just over 10 tonnes on Thursday, after recording their biggest one-day drop since late November in the previous session. It has seen outflows of more than 346 tonnes so far this year.

Investment demand was a major driver in silver's price gains of more than 80 per cent last year.

Platinum rose 0.8 per cent to $1,822.24 an ounce, while palladium climbed 1.4 per cent to $819.50.

INDUSTRIAL METALS

Copper bounced nearly one per cent on Friday, snapping a two-day slide that dragged prices to their lowest level in a month, as the dollar weakened and on worries about more monetary tightening in top-consumer China abated.

Copper prices - down as much as five per cent from all-time record peaks at $9,781 per tonne in London this week and $4.4980 per lb in New York earlier this month - found their footing on Friday, as investors reassessed global demand prospects for the industrial metal.

London Metals Exchange (LME) copper for three-month delivery rose $86, or 0.92 per cent, to end at $9,441 a tonne.

COMEX March copper firmed 3.70 cents to settle at $4.3090 per lb.

Copper also benefited from a weaker US dollar, which fell to a two-month low against the euro amid improving confidence in the euro zone.

A weaker US currency makes dollar-priced commodities more affordable for holders of other currencies.

One area where substitution could increase is air conditioning, with aluminium piping replacing copper.

Aluminium stocks jumped by 64,000 tonnes to 4,550,325 tonnes, up by more than six per cent so far this year alone.

Lead stocks last fell 175 tonnes to 264,175 tonnes, after touching their highest level since May 1995 on Wednesday.

The backwardation on lead - a premium for cash material over the three-month contract - rocketed to $80 a tonne, its highest since October 2007. This compared with a backwardation of $31 earlier this week.

Data on Friday continued to show a dominant position controlling 80 to 90 per cent of the stock warrants and cash contracts on LME lead.

Lead closed down $12 at $2,425 a tonne.

Tin rose to touch a record of $27,750 as investors focused on supply deficit expectations and the weaker dollar. The metal climbed $845 to end at $27,745.

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Oil prices fell on Monday, with Brent crude falling toward $97 a barrel and U.S. crude sliding below $88, as dealers focused on weaker equity markets and rising U.S. oil inventories.

Brent crude for March was down 30 cents to $97.30 a barrel by 1449 GMT. It reached $99.20 on January 14, the highest since October 2008. U.S. crude for March lost $1.27 to $87.84.

"The dollar strengthened and the stock market looks a little tired so this looks like crude testing support after last week's losses and the inventory builds," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Earlier in the session, Brent rose to above $98 on renewed confidence that developed economies are recovering and as Saudi Arabia's oil minister predicted strong oil demand in 2011.

The Saudi minister, Ali al-Naimi, said he expected global oil demand to rise between 1.5 million and 1.8 million barrels per day (bpd) this year -- more than forecast by the International Energy Agency.

Brent's premium to U.S. crude, also known as West Texas Intermediate or WTI, reached $9.71 on Monday, its highest since February 2009, on tight North Sea supplies and strong emerging market demand.

"There are bearish factors on the WTI side and bullish factors on the Brent side," said Mike Wittner, analyst at Societe Generale. "Put the two together and you have the basis for a wide spread."

High inventories at Cushing, Oklahoma, the delivery point for U.S. futures contracts, have depressed U.S. crude, while North Sea production glitches have helped to bolster Brent.

GOLDMAN SEES BULL MARKET

Saudi Arabia is by far the largest oil producer in the Organization of the Petroleum Exporting Countries and holder of the bulk of the world's unused oil production capacity.

Speaking at an industry conference, Naimi declined to say whether Saudi Arabia's production was in line with its OPEC target of 8.05 million bpd.

The IEA said in a report last week that the OPEC leader was making more crude available to the market.

Naimi said Saudi Arabia was set to hold about 4 million bpd of spare crude oil capacity in 2011. The kingdom has capacity of 12 million bpd, or 12.5 million bpd including the neutral zone.

Oil is still a long way from the record high of $147 a barrel it reached in 2008 and while analysts do not expect that to be revisited any time soon, some prominent voices see the rally running further.

Goldman Sachs said it believed a "structural bull market" would return to the oil market as OPEC used more of its idle capacity to meet demand.

"As OPEC spare capacity is drawn down, we expect a structural bull market to return to the oil market, with substantially higher prices," Goldman said in a report on Monday.

(Reporting by Alex Lawler, Robert Gibbons and Florence Tan; editing by William Hardy and James Jukwey)

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VIENNA: OPEC is ready to act to address supply shortages in the oil market but not to counter price moves caused by speculation, Secretary General Abdullah al-Badri told an Austrian newspaper.

The group is monitoring the situation closely, and "OPEC will intervene to stabilise the market if the market is imbalanced. OPEC will not intervene because of speculators," he told Wirtschaftsblatt in excerpts of an interview posted on its website on Saturday.

The paper said Badri thought speculation was the primary reason that prices had reached current levels, but it did not provide a direct quotation from him about this.

Brent crude oil rose above $99 a barrel on Friday, helping lift U.S. oil prices despite China's latest move to tighten credit.

Oil analysts have said oil is unlikely to surge to near $150 this year, as it did in 2008, partly because there is more oil in storage, more fuel capacity at refiners and more idle oil wells.

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The oil price held strong in the second week of 2011, edging close to 3-digit figures and fulfilling many new-year predictions. The economy is still uppermost on everyone’s mind but the US unemployment figures were weak in the recent report, suggesting a slower economic recovery. In early trading on Friday, oil was still priced above US$90 a barrel.

The temporary shutdown of a major pipeline in the US caused concern about supply all week. The Trans Alaska Pipeline originating in Alaska’s Prudhoe Bay had a leak that curtailed production by at least half. The pipeline is operated by Alyeska Pipeline Service Company who took the decision to shut the pipeline to allow time to install a bypass that will bring the flow back to normal. This pipeline supplies around 12 per cent of America’s supply. This situation certainly put pressure on the price.

There’s still plenty of oil on the market and US inventories actually rose last week. The US saw imports increase with more than 400,000 barrels added to the stockpiles. This has been the first time in 6 weeks where inventories actually rose, breaking a trend of decline. Refiners had been using their stored supplies in recent weeks. Distillate stocks also increased by 1.3 million barrels in their third straight week and gasoline stocks were up by 2.8 million barrels. The high oil price and this healthy stock build is another reason why OPEC will not be considering adding more oil to the market in the near term.

OPEC is pumping more than 29.27 million barrels a day, according to energy publisher Platt’s. This production does not include Iraq and its still putting OPEC production higher than in November by 170,000 barrels. OPEC’s agreed quota is around 26.84 million barrels a day, clearly indicating a high level of non-compliance. Platt’s estimates that compliance is now down as low as 52 per cent. As long as oil prices remain this healthy, producing countries have no real interest in curtailing production and sticking to agreed limits. All the oil being produced is not just for export as producing countries find their internal demand growth is also on the rise.

The huge discrepancy between the price of American WTI and the UK’s Brent futures has widened. Brent is trading close to US$100 a barrel with a stronger percentage increase when compared to WTI. The prolonged uncertain state of the US economy keeps pressure on price. “The disconnect between Brent and WTI has been significant,” says Jason Schenker, President of Prestige Economics in Texas. He argues that WTI as a steady benchmark may have outlived its usefulness. “We have argued that WTI is a broken benchmark, exposed to basic risk stemming from localized inventory dynamics.” He even suggests that Brent may be a better measure “for risk management purposes as well as for a proxy of crude oil prices and demand.” Analysts at Credit Suisse say they doubt Brent will pass the US$100 figure in the coming week, citing the fact that the Trans Alaska Pipeline will probably re-open soon.

As the oil price continues to gain strength, the market will put pressure on OPEC to call an extraordinary meeting. This is not warranted according to the newly appointed President of OPEC for 2011 who is also the Iranian petroleum minister. Masoud Mir-Kazemi dismissed the idea of a meeting and claimed that the shift in the value of the dollar demonstrates the real price of oil. He said “The real oil price, based on the purchasing power and value of the dollar in 1970 is around US$11 a barrel.”


Other ministers who have spoken to reporters in the last few weeks say there is no real need for an additional meeting. Kuwait’s oil minister, Sheikh Ahmad Al-Abdullah Al-Ahmad Al-Sabah said he sees no real reason why the organization should meet formally, even if the oil price goes to US$100 a barrel. The Chairman of the Libyan National Oil Corporation also agreed that US$100 a barrel would not hurt the economy, saying many of the upward pressures “are temporary.” The next official meeting is scheduled for June.

While Iraq enjoys no expected limits on oil production in the short-term, the country is still grappling with a state of uncertainty in its provinces. This does not have excess investors lining up, but the oil industry knows it needs to show willing. The giant Nassiriya oilfield needs exploration and development and the country’s Deputy prime Minister for Energy Affairs, Hussain Al-Shahristani said the bidding will be open to international oil companies. A Japanese group, led by Nippon Oil has already been qualified to bid. Iraq plans to increase oil production to meet domestic and international demand. This mainly undeveloped Nassiriya field is said to have reserves around 5 billion barrels.

International energy investors will also be keeping a close eye on opportunities in Nigeria. Shell recently offered various oil assets to the market, namely four big oil fields in the Niger Delta state who’s value could be as much as US$2 billion in total. All companies need to prove that can manage the development of the field. The on shore blocks have attracted interest from Russia’s Gazprom and the UK’s listed Afren.

The first monthly oil market reports of the year will be out next week. OPEC will be the first organization to do so on Monday, followed by the International Energy Agency’s report on Tuesday. Only last month, the IEA lowered its demand forecast by 10,000 barrels a day but still estimated a growth projection of 1.7 percent compared to 2.4 percent growth in 2009. The IEA estimates that the world will consume around 87.78 million barrels a day in 2011. OPEC is being even more cautious on projected growth figures.

While the oil price gets off to a healthy start this year, the growth in the economy will always be the key driver. Schenker says “oil has been on a real tear since the new year.” He says the main drivers right now are “expectations of global growth, financial market exuberance and the pipeline disruption in Alaska.” All of these elements will keep pressure on the market but stronger economic data from the US will be needed to bring sustained strength to the market.

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The outlook for oilsands investment - flash-frozen by the global economic crisis in 2008-09 - heated up during 2010 but the thawing was uneven to say the least.

While higher oil prices and relatively narrow heavy/light oil price differentials improved short-term economics, a decision by Canadian Natural Resources' to split up its Horizon Phase 2 mine and upgrader into several projects and the withdrawal of Shell Canada's application for 400,000 barrels per day of upgrading capacity showed good times had not entirely returned.

Further muddying the waters was an announcement just weeks ago by Suncor Energy and French giant Total to combine to build two oilsands mines and an upgrader worth more than $20 billion over the next several years.

Meanwhile, the number of in situ or thermal projects continued to multiply as foreign investors lined up to inject dollars.

Phil Skolnick, a research analyst for Canacord Genuity in New York, said he expects to see more of the same this year, provided oil prices stay strong.

"I think you're going to see continued mergers and acquisitions, probably more on the joint venture side, but there's always the possibility of corporate transactions because there are still a few of those smaller companies remaining," he said.

During 2010, Statoil got $2.3 billion from Thailand's PTT Exploration and Production for its Kai Kos Dehseh thermal oilsands project; Penn West Energy Trust sold a 45 per cent stake in its Peace River oilsands project to China Investment Corp. for $801 million; and Sinopec Corp. bought ConocoPhillips' 9.03 per cent stake in Syncrude Canada for $4.65 billion.

"We're still waiting for India to make a major move and they may be feeling the pressure given that we've seen Thailand and China doing all they've done. And Korea could make a few more steps," said Skolnick.

Analyst Lanny Pendill of Edward Jones in St. Louis said the mood among oilsands companies is determined but cautious, with cost inflation the biggest fear.

"The trend definitely right now is no upgraders," he said. "It's in situ to the extent you have that as an option, versus mining. And it's definitely the smaller expansions relative to the very large expansions seen in the past."

He said there will be big increases in oilsands volume this year as several projects ramp up or come on stream. Meanwhile, engineers will be kept busy planning expansions.

"I think most companies have pursued or are pursuing these smaller incremental expansions versus going with the 100,000-barrel-plus-per day type expansion," said Pendill. "They are approaching the contracting a little differently from the labour standpoint ... because everybody is getting a concerned again that we could see inflation heat up in the oilsands."

Investors are becoming more discerning as the oilsands business matures, says Bob Dunbar, president of oilsands consulting firm Strategy West.

Ten years ago, big mining projects were the only game in town - now there are choices not only between mining and in situ but sophisticated money is also seeking out the projects with the best reservoir quality.

What they are finding is that in situ technologies, through which 80 per cent of the oilsands will be accessed, are gaining an economic advantage.

Capital intensity, for example, at Imperial Oil's under-construction Kearl mine project is about $70,000 per flowing barrel - it'll cost about $8 billion for a project expected to produce 110,000 barrels of bitumen per day.

Suncor has said its oilsands mines will cost around $60,000 per barrel to build while its multiple Firebag thermal in situ projects will come in for between $30,000 and $35,000 per barrel.

"People like Cenovus are saying that, in some cases, they can add in situ capacity at about $20,000 per daily barrel," Dunbar said.

In early December, Canadian Natural announced it had broken down its Horizon expansion plan to five main components and thrown out set timelines to keep a tight rein on costs while bringing overall production up to 250,000 bpd.

It plans to spend between $800 million and $1.2 billion next year on Horizon while maintaining flat production, and vowed to cap spending on the project at $2.5 billion a year, as well as keeping the labour force at a 5,500-person maximum.

Suncor says it will allow a maximum 4,000 people on each mine site as it builds its Fort Hills and Joslyn projects in order to avoid cost inflation.

Meanwhile, Cenovus Energy plans to spend about $2.4 billion in 2011 as it moves ahead with manufacturing-style expansion of its steam-assisted gravity drainage or SAGD thermal oilsands projects.

The oilsands rely on technology and the success of the next big play - capturing bitumen trapped in carbonate or rock formations - will depend on how technology tests pan out this year and beyond.

Of the estimated 1.8 trillion barrels of total bitumen resource-in-place in Alberta, roughly 536 billion barrels are attributed to carbonate formations, according to the Alberta Energy Resources Conservation Board.

At 406 billion barrels, the Grosmont formation of northern Alberta is the largest carbonate reservoir - if it can be successfully developed, Canada's oil reserves could surpass those of Saudi Arabia.

Private companies Laricina Energy and Osum Oil Sands are now building the 1,800-bpd Saleski project, the first to tap the Grosmont west of Fort McMurray. State-owned Korea Investment Corp. invested in both companies earlier this year. Steaming started at the project last week.

Meanwhile, Alberta regulators approved Athabasca Oil Sands' application for a two-well thermal-assisted gravity drainage or TAGD winter test in its Dover West project's Leduc carbonate reef. The technology uses electrical heating to produce bitumen.

It will also perform a one-well steam injection test.

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OIL hit a new two-year high today, heading above $US91 a barrel after economic data offered an encouraging outlook on the US economy.

Weekly US jobless claims fell by 3000 to 420,000 last week, a larger drop than expected, while new-home sales rose in November and consumer sentiment in December moved higher.

The data added to the US Department of Energy's report yesterday that oil stockpiles fell for the third consecutive week, pushing oil prices higher ahead of the Christmas holiday.

Light, sweet crude for February delivery settled up $US1.03 at $US91.51 a barrel on the New York Mercantile Exchange. It rose to $US91.63 earlier in the session, the highest price since October 2008.

Brent crude on the ICE futures exchange traded US62 cents higher at $US94.27 a barrel.

Oil trading on Nymex closed one hour earlier today, due to the Christmas holiday. Trading on the Globex electronic exchange will close at its normal time, 4.15pm in New York (8.15am AEDT).

Trading was light during the session, below 150,000 contracts as of the market close, as trading desks wrap up activities heading into the holidays and the new year. Analysts said that today's move higher could be short-lived, as low volumes can create wider swings in futures prices.

"It always gets a little dicey trying to trade ahead of the holiday," said Phyllis Nystrom, an energy analyst with Country Hedging. "You can have a small amount of interest come in and move the market."

The last two months have been anything but sluggish, with oil prices rising more than 13 per cent since mid-November. Demand from China and the US has depleted some of the excess inventories that were built up during the recession. And a weak US dollar has helped boost the price of crude by making oil cheaper for buyers in other currencies.

Over the past three weeks, US crude inventories have fallen by 19 million barrels, according to the US Department of Energy. Meanwhile, retail petrol prices have edged up toward $US3 a gallon, a level that some economists believe could start to put strains on the broader economy.

"The perception that we're going to see improving fuel-supply levels and increasing fuel demand is pushing the market higher," said Gene McGillian, a broker with Tradition Energy.

Global supplies remain high, and the Organisation of Petroleum Exporting Countries has additional spare capacity that it could produce if prices rise too quickly.

OPEC ministers at their meeting earlier this month said they were comfortable with crude prices around $US90 a barrel, however.

Several major banks expect prices to reach triple digits next year as demand rebounds with the improving global economy. And analysts say the next few trading days will be an important test for whether oil can hold above the $US90 level.

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The world economy can withstand an oil price at $100 per barrel, Kuwait's oil minister said on Saturday.

Asked in Cairo if the global economy can stand a $100 oil price, Minister Sheikh Ahmad Al-Abdullah Al-Sabah said: "Yes it can".

Asked if he foresaw a rise in oil production, Sheikh Ahmad replied: "No, more compliance, more compliance".

Meanwhile, Qatar's oil minister Abdullah Al-Attiyah said on Saturday he did not expect Opec to meet before its scheduled gathering in June 2011.

"I do not expect an Opec meeting before June because oil prices are stable," he told reporters on the sidelines of a meeting of Arab oil exporting countries in Cairo.

Attiyah does not expect Opec to increase production in 2011.

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The Organization of the Petroleum Exporting Countries, or OPEC, said Friday demand for OPEC crude in 2010 is estimated to have risen to 28.9 million barrels a day, and it sees this same demand hitting 29.2 million barrels a day in 2011 as the world economic recovery and demand for crude strengthens.

"The world economy experienced a significant recovery in 2010. Growth is now estimated at 4.3%, representing an upward revision from the initial forecast of 2.4%," OPEC said in its monthly report published December.

"This has been an impressive reversal from the recession of 2009, although still below the 5-year average prior to the recession," it added.

Most economies grew at high levels in the first half of 2010 and the expansion continued into the second half thanks to continued government-led stimulus in the OECD, although this now is winding down. Furthermore, China, India and Brazil are trying to dampen their strong expansion to avoid overheating. These two slowing effects are expected to produce lower growth of 3.8% in 2011.

OPEC said the majority of the growth in 2011 will come from Asia, mainly China, which is expected to contribute a third of next year's growth - about the same level as in 2010.

However, this 2011 growth may be hindered by some critical issues including the still muted private consumption, persistently high unemployment, the euro- zone sovereign debt situation, fragile U.S. housing market, and China's efforts to manage its growth to avoid overheating.

Global oil demand and non-OPEC supply were also revised up significantly in 2010 with world oil demand growth revised up from the initial forecast of 0.5 million barrels a day to 1.5 million barrels a day, thanks to stronger-than- anticipated recovery in the global economy.

"Developing countries remain the contributor with more than 75% in total oil demand growth led by China, India, the Middle East and Latin America. At the same time OECD consumption has turned positive after four consecutive years of negative growth driven by an improvement in U.S. demand and to a lesser extent, consumption in the OECD Pacific," OPEC said.

Non-OPEC supply growth for 2010 was revised up to 1.1 million barrels a day, up from initial growth of 0.3 million barrels a day, due to growth in non- conventional oil and the strong performance of Russia. In contrast OPEC NGLs experienced a downward revision from 5.3 million barrels a day to 4.8 million barrels a day as a result of project delays, to represent a growth of 0.4 million barrels a day.

"As a result of these adjustments, the demand for OPEC crude in 2010 has been revised up by 0.8 million barrels a day to 28.9 million barrels a day, a figure which is still below the previous year's level," OPEC said.

For 2011, current projections for world oil demand growth stand at 1.2 million barrels a day, and demand from 2010 and 2011 are expected to offset the cumulative contraction of 1.9 million barrels a day in oil demand in 2008 and 2009.

Non-OPEC supply for 2011 has been revised up slightly to 0.4 million barrels a day while growth in OPEC NGLs has been adjusted lower by 0.1 million barrels a day to 0.5 million barrels a day.

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