U.S. crude oil rose to near a six-week high on Friday, steered by stronger gasoline demand and a positive consumer confidence report, but gains were capped by profit taking and a declining demand outlook.
The International Energy Agency lowered its global demand forecast for 2014 due to expectations that more Libyan crude will reach the market next week, pushing Brent prices lower.
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U.S. crude moved in tandem with U.S. gasoline prices, which surged early in the session due to government data released mid-week that showed a substantial draw on stockpiles, signaling robust demand before the start of summer driving season.
Data showing U.S. consumer sentiment rose to a nine-month high in April also provided support, and pushed the American benchmark's price discount to Brent to its narrowest since mid-September.
Brent's price slipped after Russia backed off threats it made Thursday to disrupt Ukraine's natural gas supply, and therefore Europe's, unless Kiev paid its bill. Russian President Vladimir Putin guaranteed Friday "fulfillment of all our obligations to our European consumers."
"The reason we had a late day sell off is book squaring," said Phil Thompson, director of Mobius Risk Group in Houston. "Once U.S. crude got up to $104.50 there was profit taking, and RBOB had correlated moves with (U.S. crude) all day" triggering a sell off in gasoline, as well, Thompson said.
U.S. oil rose by as much as $1.04 to a session high of $104.44, before giving back much of its gains to settle 34 cents higher at $103.74 a barrel. The May contract rose nearly 2-1/2 percent on average over last week.
U.S. gasoline RBOB rose by as much as 3.35 cents to a session high of $3.0381 per gallon, but gave up most gains to settle 0.65 cents higher at $3.0144 per gallon.
Brent crude settled 14 cents lower at $107.33 a barrel, but still ended the week 0.5 percent higher on average.
The Brent-U.S. crude oil spread
Both contracts were pressured after the IEA said in a monthly market report that global demand growth would average 1.29 million barrels per day (bpd) in 2014, down 60,000 bpd from its previous forecast.
This followed a similar trimming of the demand forecast by the Organization of the Petroleum Exporting Countries in its monthly report on Thursday to 29.65 million bpd in 2014, down 50,000 bpd from the previous estimate.
Tensions between the West and Russia over Ukraine remained a potential market mover after U.S. President Barack Obama and German Chancellor Angela Merkel discussed further sanctions against Russia, calling on Moscow to move its troops back from the border region.
The possibility that Libyan oil exports will pick up next week if some of its oil ports reopen remains as a bearish factor in Brent prices.
Libya's state National Oil Corp lifted a force majeure for the eastern port of Hariga on Thursday, but the country's two biggest ports, Es Sider and Ras Lanuf, remain blocked.
Late on Friday, the U.S. Commodity Futures Trading Commission released data showing the speculator group increased their net long U.S. crude futures and options positions in the week to Tuesday, April 8.
(By Elizabeth Dilts; Additional reporting by Claire Milhench in London and Manash Goswami in Singapore; Editing by Keiron Henderson, James Dalgleish and Tom Brown)