Brent crude oil climbed for a third straight session on Friday, supported by a raft of strong economic data from top oil consumer the United States that also boosted U.S. equities, although a strong dollar limited gains in oil prices.
The Conference Board's Leading Economic Index, a gauge of future U.S. economic activity, rose in April to its highest level in nearly five years, and U.S. consumer sentiment rebounded in early May to the highest level in nearly six years.
Wall Street advanced, with the S&P 500 stock index erasing the previous session's decline and on track for its fourth straight weekly advance.
"Everyone's feeling buoyant, and we got a nice little bounce on the S&P 500," said Phil Flynn, energy analyst at Price Futures Group in Chicago.
Brent crude rose 86 cents to settle at $104.64 a barrel. U.S. light, sweet crude settled 86 cents higher at $96.02, its third straight rise. U.S. crude has swung between $97 a barrel on May 6 and $92 a barrel on May 15.
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The spread between Brent crude and U.S. crude traded between $8 and $9 on Friday. On Tuesday, it narrowed to $7.20, which was the lowest since the end of 2011. Since then it has widened past $10 before easing back on Friday.
"We've had such a wild swing in the U.S. crude here in the last couple of days, so there seems to be a little bit of spread activity," said Rich Ilczyszyn, chief market strategist and founder of iitrader.com in Chicago.
Earlier, energy industry intelligence provider Genscape reported the 400,000-barrel per day Seaway pipeline was shut down, sending Brent and U.S. crude prices down nearly $1 by 11:20 a.m. (1520 GMT). Seaway carries crude oil from Cushing, Oklahoma, to Freeport, Texas.
Enterprise Product Partners LP, Seaway's owner, said the pipeline was operating normally.
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Flynn said lower gasoline prices in most parts of the country had bolstered consumer sentiment, but refinery and pipeline outages ahead of the summer driving season could push oil and refined products higher.
U.S. gasoline has risen for nine out of 12 sessions, despite a year-on-year build in gasoline inventories.
Timothy Evans, energy specialist at Citi Futures Perspective, warned in a research note of a mismatch between underlying supply and demand dynamics and Friday's positive market sentiment.
"We see a bit of a feedback loop at work here, as rising equity values are one component of the leading economic indicators, and can help consumers feel better as well. It all feels good, and it feels as though the oil market should benefit, and so prices are moving higher today," he wrote.
"The only problem is that the direct fundamental data on the oil market shows something very different," Evans wrote, citing lower year-on-year demand for refined products and rising U.S. production.
The dollar index hit a nearly three-year high, making dollar-denominated commodities more expensive for holders of other currencies.
Jim Ritterbusch, president of Ritterbusch Associates in Galena, Illinois, wrote in a research note that hints of reduced Central Bank stimulus were "not enough to quell buying interesting into oil as an asset class."
A rally in refined products such as gasoil, a bomb attack closing an Iraqi export pipeline and steadier European equities lent support to Brent crude.
Oil flows from Iraq to Ceyhan in Turkey were halted on Friday, a shipping source said. The pipeline normally pumps about 300,000 barrels per day, although output so far in May has been lower, say trade sources.
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