Brent crude posts sixth weekly gain as positive outcome expected for European deal
Brent crude rose above $125 a barrel on Friday, posting its sixth weekly gain in seven, as Greece successfully closed its bond swap offer for creditors, a key step towards securing an international bailout to avoid a messy default.
Preliminary results of the bond swap are expected later on Friday. The International Monetary Fund's managing director, Christine Lagarde, said the deal was going through overnight and it looked as if the numbers "will be promising".
Brent crude, which is set to rise more than 1.5 percent this week, inched up eight cents to $125.52 a barrel by 9.36am UAE time. US crude was up 40 cents at $106.98.
"Europe has a big impact on Brent prices and the market has been pricing in a more positive outcome and is also closely watching sentiment data out of the United States," said Natalie Robertson, an analyst at ANZ Bank.
Also providing support was data showing China's annual consumer inflation slowed sharply to a 20-month low of 3.2 percent in February, within Beijing's target of 4 percent for 2012, giving policymakers room to further loosen monetary policy to support slowing growth.
China's growth nationwide is on track to slow to just over 8 percent in the first quarter of the year, economists say, although they reckon the full year will see growth of 8 to 9 percent, well above the official target of 7.5 percent for 2012.
US data showed unemployment benefit claims in the top oil consumer rose last week but not enough to change the outlook that the labour market was growing stronger, helping to hold gains in crude prices.
The jobless claims data bolstered expectations for a solid rise in payrolls in a US government report due later on Friday, on how the jobs market fared in February.
Investors kept close watch on the tension between Iran and the West over Tehran's nuclear program, which has driven up oil prices recently.
Led by the United States, six world powers demanded on Thursday that Iran fulfill a promise to let international inspectors visit a military installation where the UN nuclear watchdog believes explosives tests geared to developing atomic bombs may have taken place.
Iranian Supreme Leader Ayatollah Ali Khamenei welcomed comments by US President Obama about a diplomatic "window of opportunity" offered by renewed talks, but said Washington's simultaneous moves to "bring the Iranian people to their knees" with harsh sanctions were driven by delusion.
"As crude flows tighten from Iran and Iraq said it has increased production, there could be a gap period in between where the supply and demand don't match," said Roberston.
"What could cap oil prices is the potential for the release of emergency stockpiles and if we see oil prices start to erode demand and impact global growth," Robertson said.
"If that happens, there could be a pullback in oil and commodity prices, and the market will move towards more safe-haven assets instead of riskier assets."
US Energy Secretary Steven Chu repeated the Obama administration's position that releasing crude oil from US reserves in an effort to bring down rising gas prices was still an "option on the table."