Brent crude futures dropped in volatile trade on Friday as the euro fell amid ongoing worries about the euro zone, although the threat of supply disruptions in Nigeria lent some support to prices.
By 11:47 a.m., Brent crude futures were 20 cents lower at $111.06 a barrel, reversing earlier gains after hitting an intra day high of $112.50.
U.S. light crude futures were up 7 cents at $99.17 per barrel, having touched an intra-day high of $100.19 earlier in the session.
Brent futures dropped tracking weakness in the euro, which fell to a session low in European trade after an auction of Italian 10-year bond yields did not manage to attract as much demand as Spain's sale on Thursday.
Definitely the weakening of the euro is one of the effects that has kept oil prices under pressure this week, Standard Bank commodity strategist James Zhang said.
But tensions between Iran and the West, together with fears of output disruptions in Nigeria as the country entered its fifth day of strikes, lent support to prices.
The problem with Brent at the moment is that it's being pulled on one side by problems in the Middle East, and pushed lower on concerns about the situation in Europe, said Michael Hewson, an analyst at CMC Markets.
Analysts are eyeing the negotiations between the Nigerian government and oil unions for a compromise after talks came to a standstill, although the country's unions said they will suspend the strikes during the weekend.
The main risk heading into the weekend is Nigeria, where discussions are ongoing between the government and the unions on the fuel subsidies, Olivier Jakob from Petromatrix said.
Nigeria produces more than 2 million barrels of crude oil per day and is a key supplier to the United States, Europe and Asia.
For a 24-hr technical outlook on oil: http://graphics.thomsonreuters.com/WT1/20121301083807.jpg
For Middle East oil transit choke points graphic click: http://link.reuters.com/jek95s
Goldman Sachs oil analysts said in a note on the commodities sector outlook that they view substantially greater upside risks to oil given the stronger fundamentals and recent events surrounding Iran and Nigeria.
Brent crude futures have risen in recent weeks after threats from Iran that it would close the Strait of Hormuz, a critical chokepoint for traded oil, if it was slapped with additional sanctions over its disputed nuclear programme. U.S. officials have said they will not tolerate a blockage of the strait.
Victor Shum, of energy consulting firm Purvin & Gertz, sees more upside risks due to political tensions, and expects Iran will be 'a longer-term issue' with no immediate supply disruption. Shum sees U.S. oil prices hovering around $100-$105 a barrel range for most of the month, with Brent having a $10 premium over U.S. oil.
U.S. allies in Asia and Europe said they would support Washington's campaign to cut Iran's oil exports, but fear of self-inflicted economic pain is tempering enthusiasm for such an embargo.
The United States placed sanctions on China's state-run Zhuhai Zhenrong Corp - which it said was Iran's top supplier of refined petroleum products - as it sought to impress on Beijing and Tehran its resolve to increase economic pressure over Iran's nuclear programme.
But India will keep doing business with Tehran, a senior Indian cabinet minister said on Thursday.
And Japan, which gets about 6 percent of its oil imports from Iran, appeared uncertain on Friday on whether it would move ahead with reducing its dependence on crude from the Islamic Republic.
Prime Minister Yoshihiko Noda threw cold water on Friday on a pledge by Finance Minister Jun Azumi that Japan would cut its imports from Iran. Noda said he wants to hold talks with the business community before taking such a decision.
(Additional reporting by Seng Li Peng and Randy Fabi in Singapore; Editing by XX)