NEW YORK Oil prices rose on Friday but settled below four-month highs hit in the session as concerns that high energy costs could threaten economic growth tempered hopes for stronger demand after the Federal Reserve launched its latest economic stimulus program.
Brent crude rose a seventh straight session and Brent and U.S. crude futures posted weekly gains as the dollar fell broadly, dropping to a four-month low versus the euro, after the Fed's Thursday announcement of a third bond-buying program. <USD/>
A weaker U.S. currency is usually supportive to dollar-denominated commodities such as oil and industrial feedstock copper, which jumped to a 4-1/2 month peak. <MET/L>
Equities also received a lift from the U.S. central bank's action, with U.S. stocks up a fourth straight day and European shares jumping to a 14-month high. .N .EU
"The market is exhausted after rising so much, and the IEA (International Energy Agency) economist worrying about high oil prices probably helped pull prices back some," said Dan Flynn, analyst at Price Futures Group in Chicago.
Current oil prices could push the global economy into recession, Fatih Birol, chief economist at the International Energy Agency said on Friday.
Birol said Europe and China are most vulnerable to high prices but declined to say whether this latest price jump could prompt the IEA to release oil reserves. He said the agency was monitoring markets very closely.
Front-month November Brent crude rose 78 cents to settle at $116.66 a barrel, after reaching $117.95, the highest since prices reached touched $118.45 on May 3.
Brent gained 2.1 percent for the week.
U.S. October crude, up 2.7 percent for the week, rose 69 cents to settle at $99 a barrel. U.S. crude reached $100.42, its first time over $100 since May 4 when it touched $102.72.
U.S. total crude trading volumes were a robust 51 percent above the 30-day average and outpaced Brent, which lagged its 30-day average by 6 percent.
Money managers raised their net long U.S. crude futures and options positions in the week to September 11, the Commodity Futures Trading Commission said on Friday.
Crude futures prices are up about 2 percent this month after surging 9 percent in August and 7 percent in July, on revived geopolitical tensions and an anticipated maintenance-related drop in North Sea crude oil production in September.
"The Fed will be indirectly adding more liquidity into the asset markets and that money will need to go somewhere and part of it will go into commodities, even if current commodity prices are already at demand-destruction levels," said Olivier Jakob at Petromatrix in Zug, Switzerland.
HIGH OIL PRICES AND THE ECONOMY
Highlighting the economic risk from surging oil prices, a jump in gasoline costs pushed up U.S. consumer prices in August at the fastest pace in more than three years and squeezed spending on other items.
Industrial production dropped 1.2 percent in August, the biggest decline since March 2009. The consumer price index increased 0.6 percent, the first rise in five months and the biggest since June 2009.
Gasoline prices, which also recorded their largest increase since June 2009, accounted for about 80 percent of the rise in consumer inflation last month, the Labor Department said.
In contrast to those cautionary reports, U.S. consumer confidence unexpectedly improved in early September as Americans anticipated better economic and employment prospects, a survey showed.
U.S. gasoline futures rallied 1.8 percent, moving back above $3 a gallon after falling the previous two sessions. Heating oil, the benchmark distillate futures contract, rose nearly 1 percent.
"Following Thursday's weak performance, the U.S. product markets are now the strongest elements in the ... complex, benefiting from something of a trampoline effect as they try to catch up with the prior gains in crude oil," Tim Evans, analyst at Citi Futures Perspective, said in a research note.
Oil prices received support from escalating anti-U.S. protests over a film demonstrators consider blasphemous to Islam. That and the dispute over Iran's nuclear program kept the geopolitical risk of supply disruption in North Africa and the Middle East in focus.
An aide to Iran's supreme leader told the Iranian Students' News Agency that Israel's military threats had "put Israeli citizens one step away from the cemetery" and that Lebanese militant group Hezbollah was ready to hit back.
(Additional reporting by Peg Mackey in London and Randy Fabi in Singapore; Editing by Dale Hudson, Bob Burgdorfer, Jim Marshall, David Gregorio and Andre Grenon)
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