Oil prices rose 3 percent Friday, posting a second straight weekly gain, on lift from stronger-than-expected U.S. retail sales and optimism about the prospect that European leaders can reach a deal to address the euro-zone debt crisis.
With Brent's front-month November contract expiring on Friday, the premium to U.S. crude strengthened and intraday
reached a record $28.10 a barrel.
U.S. retail sales grew at their fastest pace in seven months in September, up 1.1 percent on strong auto purchases.
The rise was stronger than economist expectations and sales for August and July were revised higher as well.
``Equities were up on the retail numbers and good Google results and oil is very responsive to those numbers and we're seeing a reallocation of funds, with some shorts possibly moving back into long positions,'' said Richard Ilczyszyn senior market strategist at MF Global in Chicago.
But despite the September buying splurge, consumer sentiment slipped in early October more than expected, sending
the gauge to the lowest level in more than 30 years.
France and Germany reaffirmed their commitment to a recent deal between their two leaders to combat the euro zone crisis, lending support to oil prices earlier.
The expiring Brent November crude contract rose $3.57 to settle at $114.68 a barrel, the highest close since Sept. 15
and having pushed above both the 100- and 200-day moving averages for front-month.
Brent's 8.3 percent weekly gain was the largest since the week to Feb. 25.
Brent December crude rose $3.03 to settle at $112.23, after reaching $112.65 intraday peak.
U.S. November crude was up $2.57 to settle at $86.80 a barrel, the highest settlement since Sept. 20. The 4.6 percent
weekly gain was the biggest since the week to Oct. 7.
U.S. heating oil also posted near 3 percent gains as the northern hemisphere heating season approaches.
Broker and industry sources have pointed to Shell's recent Singapore refinery fire, Europe's low stockpiles and U.S.
Northeast refineries idled or undergoing maintenance as factors responsible for strong distillate prices.
U.S. stocks rose as the supportive retail sales eased fears of another recession and optimism was at least temporarily
revived that Europe was making progress on a solution to its debt crisis.
The euro zone debt crisis will dominate a summit of G20 finance chiefs and central bank heads in Paris, with a
downgrade of Spain's credit rating highlighting the risks to an economy much larger than that of Greece.
A dip in Chinese inflation to 6.1 percent in September also boosted oil prices, because it raised the possibility the
central bank may put monetary tightening on hold, which could boost the economy and fuel demand.
Supply disruptions in the North Sea and in OPEC-member Nigeria, as well as still irregular exports from Libya, have
reduced global output of some of the best-quality light, sweet crude oil, helping support Brent crude prices.
Gunfights broke out in the Libyan capital Tripoli on Friday between dozens of supporters of deposed leader Muammar Gaddafi and forces of the new government.
This week's intensified row between OPEC members Saudi Arabia and Iran was also helping to boost Brent by adding a political risk premium to prices, analysts said.
U.S. President Barack Obama warned Iran on Thursday it would face the toughest possible sanctions for an alleged plot to kill the Saudi ambassador in Washington.
``We knew they (Saudi Arabia and Iran) were not good friends and now there's a new struggle between two of the biggest members in OPEC,'' said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
OPEC is set to meet to discuss policy on Dec. 14 in Vienna.