US crude oil futures settled higher on Friday, driven by strong US industrial output data in the world's largest oil consumer and a weaker US dollar. The weaker dollar buffered oil prices from declining on the back of the US stock market being knocked off its highs.
The dollar fell as investors opted to book profits after US 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 US 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. US 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 US economic data, and Middle East supply concerns. US industrial production strengthened more than expected in February on a rebound in manufacturing. But positive US data did not buoy the stock market, which was off record highs as shares J.P. Morgan Chase declined. The bank was dealt a blow by a US Senate report alleging it had ignored risks in a derivatives portfolio that led to $6 billion in losses.
Separately, the US Federal Reserve asked J.P. Morgan 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 US President Barack Obama's comments that military force remained an option if sanctions and diplomacy failed to curb Iran's nuclear ambitions. 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 US resolve to confront Tehran if necessary. Worries that the stand-off 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. US 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 Labour Department showed.
According to data compiled by Gasbuddy.com, which tracks average US retail fuel prices, the price of a gallon of gasoline at US pumps has risen more than 40 cents this year to $3.67. Four-week average US gasoline demand is up 1.1 percent from year-ago levels, government data showed earlier this week. US gasoline futures for April rose 0.5 percent to $3.157 per gallon on Friday.
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