Brent crude rose on Friday, as improved U.S. consumer sentiment and a weak dollar put it on course to snap a streak of three lower closes and to end the quarter with a 14 percent gain.
The euro edged up against the dollar and the yen as Spain's budget boosted hopes one of the euro zone's larger economies would tighten its belt. The dollar index was down 0.25 percent against a basket of currencies.
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The euro had already strengthened against the dollar after euro zone finance ministers agreed to raise their financial firewall. A weaker greenback can lift dollar-denominated oil by making it less expensive for consumers using other currencies.
U.S. consumer confidence rebounded to its highest in 13 months at the end of this month as optimism about jobs and income overcame higher prices at the gasoline pump, according to the Thomson Reuters/University of Michigan's final March reading.
The consumer optimism and a separate report showing consumer spending in February increased by the most in seven months helped counter data showing U.S. Midwest manufacturing activity slowed in March.
"The weak dollar and the euro boost off Europe's rescue fund increase and equities moving up all supported oil early and then there was a pull back after the Chicago PMI," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.
"Some end-of-quarter volatility should be expected during the day," Dillman said.
Brent May crude rose 50 cents to $122.89 a barrel by 1:05 p.m. EDT (1705 GMT), having swung from $122.58 to $123.80.
U.S. May crude moved up 70 cents to $103.48 a barrel, having traded from $102.82 to $103.69 and testing resistance above the 50-day moving average of $103.50. U.S. crude was on track to post a 4 percent gain for the first quarter.
Brent's premium to U.S. crude
Total crude trading volumes were tepid, with turnover for both Brent and U.S. crude well under their 30-day averages.
U.S. April RBOB gasoline and heating oil futures was near unchanged in choppy trading ahead of those front-month contracts' expiration at the end of Friday's session.
Gasoline was on pace to post a 26 percent jump for the quarter, matching the gain in the first quarter of 2011. The usual seasonal rally ahead of the U.S. driving season and several refinery shutdowns in the United States and the Atlantic basin have sent fuel prices higher.
Fears of supply disruption in the Middle East underpinned oil, but gains were capped by expectations that some Western nations will release strategic reserve stocks. Concern also remained over the untamed euro zone crisis.
"Prices are still very range-bound," said Amrita Sen at Barclays in London. "Overall prices are within a range, still constrained by fears on the upside of a strategic petroleum release and on the downside by the strong fundamentals and geopolitical concerns."
IRAN AND OIL SUPPLY
Friday's oil price strength came despite a Reuters survey showing OPEC oil output rising in March to its highest level since October 2008 as rising Iraqi and Libyan production offset lower production in Iran as importers scale back purchases from Tehran, a Reuters survey found.
Iran's exports face a European Union ban on its crude from July 1 as the West tightens sanctions in a dispute over Tehran's nuclear program. Reuters a week ago reported that exports were falling. (Additional reporting by Zaida Espana in London and Florence Tan in Singapore; Editing by Dale Hudson and Marguerita Choy)