Oil prices retreated on Friday in light volume trading as uncertainties about Europe's plan to tackle its debt problems prompted some profit taking after the previous session's rally.
Brent crude managed a small weekly gain, but its bigger losses on Friday dropped it below its 100-day moving average and reduced the premium to U.S. crude to under $17 a barrel after it topped $19 intraday on Thursday.
After a rally like we saw yesterday it was reasonable to see oil prices fall, Torbjorn Kjus of DnB NOR said.
There was a bit of euphoria yesterday based on the EU meeting and when you look at it (it) wasn't that strong a package. It was a moderate package so it was a little bit surprising to see so much of a rally.
Oil rose on Thursday in a cross-market rally after European governments announced a plan to tackle the region's sovereign debt crisis and after news that the U.S. economy in the third quarter grew at its fastest pace in a year..
ICE Brent December crude fell $2.17 to settle at $109.91 a barrel, falling back below the front-month 100-day moving average of $111.46. Brent posted a 35-cent weekly gain, after a 4.5 percent loss in the previous week.
U.S. December crude fell 64 cents to settle at $93.32 a barrel, in choppy trading from $92.01 to $93.93.
U.S. crude posted a 6.77 percent weekly gain, biggest percentage gain since the week to February 19.
Crude trading volumes remained tepid a second straight day, with both Brent and U.S. volumes under a half million lots traded. Brent was 25 percent under and U.S. 31 percent below their respective 30-day averages.
U.S. volumes topped 1 million lots earlier this week.
Speculators raised their net long position in U.S. crude oil and options positions in the week to October 25 to the highest level since June, data from the U.S. Commodity Futures Trading Commission showed.
News that winter storm watches were issued for parts of the Mid-Atlantic and Northeast failed to keep U.S. heating oil futures from a bigger percentage loss than for crude and U.S. gasoline fell more than 2 percent as November refined products contracts approached expiration on Monday.
Oil prices also received pressure from data showing Japan's factory output fell in September for the first time since the March earthquake. This indicated that recovery after the disaster is tailing off in the face of slowing global growth, the strong yen and Europe's problems.
The markets are now going to react to most all of the macroeconomic data that hits the airwaves much as it did ... when Japanese factory production declined by 4 percent in September, Dominick Chirichella, senior partner at Energy Management Institute in New York, said in a note, emphasizing the global manufacturing sector's importance going forward.
U.S. stocks finished a fourth week of gains, with major indexes ending mixed as investors paused following a rally that sent the S&P 500 index up almost 20 percent since briefly dipping into bear market territory earlier this month.
Mixed U.S. economic data did little to support oil prices, as sluggish income growth made U.S. households to cut back on saving in September to raise their spending, though a separate report showed consumer morale brightened in October.
EUROPE STILL A FOCUS
The dollar index clung to a small gain, helping pressure dollar-denominated oil, as the euro fell from a seven-week high versus the greenback hit Thursday and an Italian bond auction showed investors are not fully convinced the region's problems are resolved.
A German court on Friday suspended a parliamentary committee's right to approve urgent actions by the euro zone's bailout fund, potentially delaying key moves to tackle the bloc's crisis.