Oil falls on euro zone worries, posts weekly loss

A view of a drilling rig and distant production platform in the Soldado Field off Trinidad's southwest coast, September 10, 2011.

NEW YORK (Reuters) - Oil prices fell on Friday, posting a loss for the week, as anticipation of downgrades by Standard & Poor's of several euro zone countries countered the supportive effect of anxiety about Nigerian strikes and Iranian threats to shipping.

After the U.S. stock market close and oil price settlements, the credit ratings agency did lower ratings for France, Italy, Spain and others in the European single-currency bloc, though it left Germany's AAA rating intact.

News dribbled out throughout the day from various government sources that that S&P was set to downgrade, pushing the euro to a 16-month low versus the dollar and pressuring dollar-denominated oil prices.

European shares turned negative and U.S. stocks fell on the credit-downgrade worries. .EU .N

"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.

Nearby months noticeably weakened compared to months further out on the calendar.

"A range of issues is helping weaken the Brent calendar spread including the February contract's expiration Monday, Libyan oil returning, North Sea output is better after maintenance and then the uncertainty about Iran and Nigeria going forward," said Tim Evans, energy analyst for Citi Futures Perspective.

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 44 percent above the 30-day average and that of U.S. crude 38 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 on Friday, after an Italian bond sale failed to match the success of Thursday's Spanish auction.

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 limited, and U.S. crude briefly turned higher in post-settlement trading, 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.

(Additional reporting by Gene Ramos in New York, Yeganeh Torbati and Zaida Espana in London and Seng Li Peng and Randy Fabi in Singapore; Editing by David Gregorio and Alden Bentley)