(Reuters) - Brent crude prices slipped on Friday in tug-of-war trading after an initial estimate of U.S. first-quarter economic growth lagged expectations, but losses were limited by hopes for additional easing by the Federal Reserve to boost sputtering U.S. growth.

In extremely light trading, U.S. crude recovered and edged up late in the open outcry session, helped by a revised higher February oil demand number from the Energy Information Administration (EIA), traders and broker said.

Both Brent and U.S. crude headed for a small weekly gain and traded in relatively narrow ranges as the dollar's weakness and a rise in U.S. consumer sentiment also provided support.

Oil fell after ratings agency S&P downgraded Spain's credit rating, but pared losses ahead of the U.S. GDP figures.

Some investors believe slowing U.S. growth may prompt the Federal Reserve to launch a third round of government bond buying, or quantitative easing, known on Wall Street as QE3.

Bad news for the economy is being interpreted as good news for commodities because it may put QE3 back on the table, said Dominick Chirichella, senior partner at Energy Management Institute in New York. Whether or not that trade has any longevity is not clear.

The dollar slumped to multi-week lows against the euro and yen as the slowing U.S. growth raised the possibility of more stimulus from the central bank. A weaker U.S. currency can be supportive to dollar-denominated oil by making it less expensive to consumers using other currencies.

Brent June crude was down only 15 cents to $119.77 a barrel at 2:10 p.m. EDT (1810 GMT), having traded in a range of $119.06 to $119.95. Brent was on track for a nearly 1 percent weekly gain but a more than 2 percent loss for the month.

U.S. June crude rose 31 cents to $104.86, having reached $104.90, ahead of the 50-day moving average of $105.10. It was on pace for a 1 percent weekly rise and a similar monthly gain.

Brent's premium to its U.S. counterpart narrowed back below $15 a barrel, after reaching $15.64 intraday.

Total crude trading volumes were very light, with U.S. turnover 59 percent below its 30-day average. Brent dealings, while outpacing turnover for U.S. contracts, were 27 percent below the 30-day average.

The Chicago Board Options Exchanges Oil Volatility Index .OVX fell to a record low below 25 intraday. The index is a measure of implied volatility and a low reading is an indication of a low risk perception in the markets.

U.S. RBOB gasoline futures edged up in choppy trading, while heating oil dipped, as front-month May contracts approach expiration on Monday.


U.S. economic growth cooled in the first quarter to a 2.2 percent annual rate, the government said in its advanced estimate, moderating from the fourth quarter's 3.0 percent.

Expectations were for growth between 2.3-2.5 percent, with the consensus forecast at the upper end of that range.

The Federal Reserve reiterated its intent to keep interest rates low and Fed chief Ben Bernanke said the central bank stood ready to move to support the economy if it faltered.

U.S. consumer sentiment inched up in April from March in the Thomson Reuters/University of Michigan's final reading for the month, the better than expected rise put the index at its highest since February 2011.


The EIA said global oil supply exceeded demand by 500,000 barrels per day over the last two months as Saudi Arabia lifted output, more than countering rising non-OPEC outages. The report is required every 60 days by the Iran sanctions law enacted in December.

This month's revived talks involving Iran and major powers about Tehran's disputed nuclear program eased the geopolitical fear premium in oil prices, but traders and analysts remain skeptical the talks will succeed.

Disrupted production in the North Sea, Yemen and Sudan and turmoil in OPEC-member Nigeria have supported oil prices even as signs of slowing global economic growth, lackluster U.S. demand and rising stockpiles pulled crude prices off 2012 peaks reached in the first quarter.

(Additional reporting by Gene Ramos in New York, Claire Milhench in London and Luke Pachymuthu in Singapore; Editing by Alden Bentley and David Gregorio)