Benchmark Brent crude rose on Friday in choppy trade amid dwindling expectations of an imminent breakthrough in talks over Iran's nuclear program, while US prices sank. Heavy unwinding of the spread trade between European Brent and US West Texas Intermediate (WTI) drove Brent's premium to an 8-month high of $16, the widest since March. European gas oil led the complex with a 1.8 percent gain, rising for a second day after refinery glitches in the Rotterdam area.
Iran and six global powers struggled on Friday to overcome stumbling blocks holding up an interim deal under which Tehran would restrain its contested nuclear program in exchange for some relief from punitive sanctions.
US Senate Majority Leader Harry Reid said on Thursday he was committed to moving ahead with a tougher Iran sanctions bill, adding to uncertainty among some traders who had been betting on a drop in prices.
"I think shorts got caught off guard in all the markets," said Rich Ilczyszyn, chief market strategist at iitrader.com in Chicago.
Brent for January delivery extended gains from earlier in the session and rose 80 cents to $110.88 per barrel at 12:40 pm EST (1740 GMT), after trading to a six-week high of $111.40. The contract was on track for a second week of gains, as supply outages in Libya and rising oil demand in China supported prices.
US crude pared some losses by midday. The contract fell 30 cents to $95.14 per barrel, after trading as low as $94.05. It posted its biggest daily percentage gain in nearly two months on Thursday and was set to end the week 1.4 percent higher, snapping six weeks of declines.
Brent's premium over US oil was last trading at $15.74 a barrel after widening by nearly $1.40 to $16.02.
China's oil demand is expected to rise an average 3.8 percent a year in 2014 and 2015 with demand for transportation fuels a main factor.
China has been the engine of global oil demand in the past decade, accounting for almost half of total growth. A slowing economy, however, has weighed on its consumption this year.
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