U.S. crude oil ended modestly lower in a seesaw session on Friday, as the dollar gained following better-than-expected U.S. consumer data, although concerns about tightening international supplies lent support.
A widely watched gauge of U.S. consumer sentiment came in stronger than expected, although the Chicago Purchasing Managers Index (PMI) came in below expectations.
Federal Reserve governors earlier said the bank was in no rush to curtail its bond-buying program, but investors have been interpreting positive data as signs the Fed policy could shift sooner rather than later.
Comments by Fed governors on Friday appeared to allay investors' concerns the policy change would derail growth and dampen oil demand in the world's top oil consumer.
The dollar rose against the yen and euro on Friday, as investors again began pricing in the possibility that the Fed could begin to downsize its bond-buying program as soon as the September policy meeting.
A strong U.S. currency makes dollar-denominated commodities such as Brent crude oil more expensive for holders of other currencies, and weighs on prices.
Oil prices seesawed back and forth throughout the session, which was the last of the second quarter. Brent rose initially on positive data on German retail sales and reassuring comments from the governor of the People's Bank of China that the world's second-largest oil consumer was not in a credit crunch.
"Those were early helpful factors, but since then, we've had the dollar index turning around and rallying sharply and taking the steam out of crude oil," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
"And some of the U.S. macroeconomic reports weren't helpful, particularly the Chicago PMI, which came in so poorly."
Brent crude oil futures traded near $103, off about 77 cents on the day. U.S. crude oil settled at $96.56, down 49 cents on the day. For the quarter, U.S. oil ended down about 0.7 percent, according to Reuters data, but posted a 5 percent gain in June.
The North Sea benchmark, however, was still on track for its third quarterly loss, the longest losing streak since 1997/98, on persistent worries about the state of the global economy and its impact on oil demand.
The premium of Brent over U.S. oil futures was at $5.57 a barrel after narrowing earlier in the day to $5.40, its tightest since January 2011.
Brent has traded largely in a range between $99 and $107 since the beginning of May. U.S. crude has similarly been wedged between around $90 and $99 since May 1.
Friday marks the end of the second quarter, and trading volumes for both crudes were lighter than their 30-day moving averages.
"There's quarter-end bookkeeping so it's going to be a light trading day," said John Kilduff, partner at Again Capital LLC in New York. "I wouldn't take too much from the direction of the market today."
Brent was also supported by continued turmoil in Libya and other oil-producing regions as well as a North Sea outage.
Britain's Buzzard oilfield output is expected to stay at a reduced rate of around 170,000 barrels per day (bpd) for around five days, an industry source said on Thursday.
Russian Urals crude values spiked to near a record high on Friday as oil producer Surgut sold barrels at a healthy premium due to a shortage of supplies from the world's largest oil producer from Baltic ports.
Natural Gas Battered Again
U.S. natural gas futures fell, with mild weather forecasts for most of the eastern half of the nation driving the front contract to a 3-1/2 month low despite expectations for some record heat out West.
Front-month gas futures on the New York Mercantile Exchange were down 2.1 cents at $3.561 per million British thermal units after slipping early to a 3-1/2 month low of $3.551.
"There's the continued lack of (hot) weather in the East consuming region, and the Independence Day holiday week typically means light demand," a Texas-based trader said, noting that many businesses are closed during the holiday. Most traders viewed Thursday's 95 billion cubic feet weekly inventory build as bearish, noting it came in well above the Reuters poll estimate of 88 bcf and the five-year average increase for that week of 79 bcf.
Prices sold off sharply after Thursday's Energy Information Administration report, sinking more than 4 percent. So far this week the front contract is down about 5 percent. Inventory builds have exceeded the five-year average for the last four weeks and prompted some analysts to raise estimates for peak storage this year, but most still expect stocks to head into next heating season below last year's record high.