UPDATE 8-Oil gains on weaker U.S. dollar

Sat Mar 16, 2013 2:13am IST

* U.S. industrial production beats forecasts
    * High gasoline prices fuel U.S. consumer inflation
    * Stock market weakness offset by weaker dollar
    * Tensions with Iran keep supply worries in focus

 (Recasts, adds settlement prices, details throughout.)
    By Jeanine Prezioso
    NEW YORK, March 15 (Reuters) - U.S. crude oil futures
settled higher on Friday, driven by strong U.S. industrial
output data in the world's largest oil consumer and a weaker
U.S. dollar.
    The weaker dollar buffered oil prices from declining on the
back of the U.S. stock market being knocked off its highs.
    The dollar fell as investors opted to book profits after
U.S. inflation data kept the door open for the Federal Reserve
to continue its bond-buying program for the foreseeable
future. 
    "The dollar is down a lot more in the last two days so hence
the buoyancy in energy prices," said Walter Zimmermann, chief
technical analyst with brokerage United ICAP in New York. "And
energy prices are being insulated from stock market weakness by
weakness in the dollar today."
    Crude oil prices are denominated in U.S. dollars and when
the value of the currency sinks, prices rise to offset the
weakness.
    The dollar index, which tracks the greenback versus a basket
of currencies, fell 0.4 percent to 82.242.
 
    U.S. crude oil futures settled 42 cents higher at
$93.45 per barrel on Friday.
    Brent crude oil settled up 86 cents or 0.79 percent
at $109.82 per barrel also on strong U.S. economic data, and
Middle East supply concerns.
    U.S. industrial production strengthened more than expected
in February on a rebound in manufacturing. 
    But positive U.S. data did not buoy the stock market, which
was off record highs as shares JPMorgan Chase declined. 
    The bank was dealt a blow by a U.S. Senate report alleging
it had ignored risks in a derivatives portfolio that led to $6
billion in losses. 
    Separately, the U.S. Federal Reserve asked JPMorgan and
Goldman Sachs to improve how they determine capital
payouts to shareholders as part of the banks' "stress tests".
 
    Oil prices also got a boost on Thursday from U.S. President
Barack Obama's comments that military force remained an option
if sanctions and diplomacy failed to curb Iran's nuclear
ambitions. 
    
    STANDOFF
    Iran was still more than a year from developing a nuclear
weapon, Obama said in an interview with Israeli television
broadcast on Thursday, six days before his visit to Israel.
    
    Obama appeared to send a message to Israeli Prime Minister
Benjamin Netanyahu on the need for patience with Washington's
Iran strategy, while also showing U.S. resolve to confront
Tehran if necessary. 
    Worries that the standoff between the West and Iran over the
Islamic Republic's nuclear program will escalate and disrupt oil
supplies have kept Brent above $100 a barrel through most of
2012 and this year.
    
    HIGH U.S. GASOLINE PRICES 
    U.S. consumer prices registered their biggest increase in
nearly four years, with a rise in gasoline costs accounting for
almost three-fourths of the jump in consumer prices, data
released on Friday by the Labor Department showed.
 
    According to data compiled by Gasbuddy.com, which tracks
average U.S. retail fuel prices, the price of a gallon of
gasoline at U.S. pumps has risen more than 40 cents this year to
$3.67. 
    Four-week average U.S. gasoline demand is up 1.1 percent
from year-ago levels, government data showed earlier this week. 
    U.S. gasoline futures for April rose 0.5 percent to
$3.157 per gallon on Friday.  

 (Additional reporting by Joshua Schneyer, Dasha Afanasieva,
Simon Falush and Manash Goswami; Editing by Dale Hudson and
Chizu Nomiyama)
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