Iran-Israel tensions continue to seethe as mixed US economic data provides few trading cues
Brent crude oil rose towards $103 a barrel on Friday, as unrest spreading across the Middle East fanned fears of a supply disruption in the major oil-producing region.
US crude fell, but held above $86 a barrel, after jumping more than $1 the previous day.
Parts of the Middle East and Arab North Africa could see renewed public anger towards their governments on Friday, with the focus on Bahrain and Libya as protesters bury people killed in recent clashes.
In Libya's eastern city of Benghazi early on Friday, thousands of anti-government protesters crowded on to the streets, a day after "Day of Rage" demonstrations led to skirmishes with security forces in which more than 20 people may have been killed.
Tension between Israel and Iran continued to seethe amidst uncertainty about Iran's plans to send navy ships through the Suez Canal, in a move that Israel has called a "provocation".
"Short-term geopolitical nervousness will continue to underpin Brent prices, but in terms of fundamentals, support will come from the gradually recovering US economy and the ongoing momentum in China," said David Cohen, director at Action Economics in Singapore.
"There doesn't seem to be any dramatic development in terms of the unrest in the Middle East, so prices might take a short-term breather," he added.
Brent crude for April delivery rose 14 cents to $102.73 a barrel by 0725 GMT, after settling $1.19 lower at $102.59. Wednesday's close of $103.78 was its highest since September 2008.
US crude for March delivery sank 27 cents to $86.09 a barrel, after settling 1.6 percent higher at $86.36, its biggest gain in two weeks. Short-covering ahead of the contract's expiry on Tuesday helped to pull prices higher.
The spread between the two grades eased to just under $14, after hitting a fresh record of $16.31 a barrel two days ago.
But Brent oil prices are forecast to drop later this year as analysts expect the risk premium for unrest in the Middle East to ebb, a Reuters poll showed.
US economic data released on Thursday was mixed, signalling the economy was struggling to speed up recovery, but the reports provided few trading cues.
January core consumer prices rose at their quickest pace in more than a year and above expectations.
But US initial jobless benefit claims rose more than expected, while the Philadelphia Federal Reserve Bank said its business activity index increased in February to its highest reading since January 2004.
The dollar was steady to firmer on Friday, after weakening overnight as the Swiss franc benefited from safe-haven appeal following tensions in the Middle East.
The dollar index, which tracks the greenback's performance against a basket of major currencies, was up 0.1 percent at 78.
Asian stocks are set to finish their best week in two months on Friday as fading concerns over inflation encouraged investors to hunt for value in beaten down markets within the region.