Oil prices fell on Friday and posted a loss for the week as pressure from reports that Standard & Poor's will downgrade several euro zone countries countered the supportive effect of anxiety about Nigerian strikes and Iranian threats to shipping.
Credit rating agency Standard & Poor's was set to downgrade several countries in the European single-currency bloc, a senior euro zone government source said. The news pushed the euro to a 16-month low versus the dollar and pressured dollar-denominated oil prices.
European shares turned negative and U.S. stocks fell on the credit-downgrade fears.
"While it should be anticlimatic, the realization will also be sobering. In particular, the flight to the dollar will be accelerated, pushing crude oil prices lower," said John Kilduff, partner at Again Capital LLC in New York.
Ahead of its contract expiration on Monday, Brent February crude fell 82 cents to settle at $110.44 a barrel. It fell intraday to $109.71, just above its 100-day moving average of $109.69, after retreating from a $112.50 high.
Brent posted a weekly loss of 2.32 percent, after jumping 5.28 percent the previous week.
U.S. February crude fell 40 cents to settle at $98.70 a barrel, having swung from $97.70 to $100.19. For the week, U.S. front-month crude lost 2.82 percent, wiping out the previous week's 2.76 percent gain.
Total trading volume for Brent crude was 41 percent above the 30-day average and that of U.S. crude 36 percent above the same average.
Cash market oil traders said upcoming and current refinery maintenance, especially in the U.S. Gulf Coast region and including at BP Plc's Texas City refinery, had helped U.S. gasoline futures settle higher.
U.S. heating oil futures ended lower.
Euro zone concerns resurfaced early, after an Italian bond sale failed to match the success of Thursday's Spanish auction, reflecting the heavy refinancing load Rome faces over the next three months.
U.S. consumer sentiment rose in early January to its highest in eight months on a pick-up in optimism about job prospects, a Thomson Reuters/University of Michigan index showed.
While the consumer news provided a supportive note for oil, an earlier report showed the U.S. trade deficit widened in November to its largest in five months, indicating imports might have weighed on fourth-quarter economic growth.
NIGERIA AND IRAN
Nigerian unions suspended strikes and protests for the weekend while talks continued with the government over the scrapping of a popular fuel subsidy. Unions warned of more industrial action if there was no resolution.
Iran's dispute with the West over the country's nuclear program and recent threats by Tehran to shut the key Strait of Hormuz oil-shipping lane remained supportive for crude prices, brokers and analysts said.
Russia's departing ambassador to NATO said on Friday that Russia would regard any military intervention linked to Iran's nuclear program as a threat to its own security.
With Iran facing intensifying sanctions, a high-level team from the U.N.'s International Atomic Energy Agency is expected to visit the country this month seeking explanations about concerns that Tehran is trying to develop nuclear weapons.
Oil price losses were expected to be limited by investor reluctance to be too short ahead of a U.S. holiday on Monday that will shut open outcry trading on the New York Mercantile Exchange, though there will be electronic trading for the Tuesday trade date.
"If you are a trader, do you want to be short ahead of a three-day weekend?" said Phil Flynn, analyst at PFGBest Research in Chicago. Other market participants also noted lingering uncertainty about Nigeria and Iran.