Oil falls on Greece deal doubt, but up on week

A driver refuels his car at a gas station in Milan November 8, 2011.

NEW YORK (Reuters) - Oil prices fell on Friday, but posted gains for the week, as the latest hitches in negotiations on a Greek bailout package pressured oil, the euro and equities.

A reduced oil demand growth forecast from the International Energy Agency (IEA), the sixth consecutive monthly report with diminished growth expectations, also helped pressure oil.

The euro fell and the dollar index .DXY strengthened after the leader of the far-right party in Greece's coalition declined to back a bailout agreement, once more raising concerns about the risk of a default. <USD/>

"Today's selloff across the complex was easily explainable as oil simply became entrenched in a broad based risk-off trade related to continued lack of progress on a Greek debt deal," Jim Ritterbusch, president at Ritterbusch & Associates, said in a note.

Brent March crude futures fell $1.28 to settle at $117.31 a barrel, snapping a string of eight straight gains and following the previous session's close at $118.59, the highest settlement since late July.

The stumble still left Brent up 2.38 percent for the week, its third straight weekly rise.

U.S. March crude, after three consecutive higher settlements, fell $1.17 to end at $98.67 a barrel, but preserved an 83-cent weekly gain.

Speculators raised their net long positions in U.S. crude futures and options in the week to February 7, Commodity Futures Trading Commission data released on showed.

Brent's premium to U.S. crude was little changed, hovering around $18.65 a barrel.

Brent's retreat ahead of the weekend, after the recent sharp price rise, was not unexpected after its Relative Strength Index pushed above 70 this week, signaling an overbought condition for investors watching technical indicators.

"The market has paused for breath after its sustained rally," Mark Thomas, head of European energy at brokerage Marex Spectron in London, said.

U.S. equities also were pressured by the wrangling over Greece's debt problems, along with news of a drop in consumer sentiment in early February.

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For a 24-hr technical outlook on Brent:

here

For a 24-hr technical outlook on WTI:

here

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IEA TRIMS DEMAND VIEW

Global oil demand will grow by less than 1 percent in 2012, the IEA said in its monthly oil report, saying a weak global economy may limit demand growth this year. <IEA/M>

The IEA cut its 2012 global oil demand growth forecast by 250,000 barrels per day (bpd) to 800,000 bpd.

The IEA's view followed monthly reports from OPEC and the U.S. Energy Information Administration, with OPEC lowering its demand growth forecast because of economic weakness in Europe and the United States. The EIA raised its expectations, if by only 50,000 bpd, the first boost since October.

FRAGILE CHINA

China revealed signs of slowing domestic demand as data showed imports slipping to their lowest in more than two years and weaker-than-forecast bank lending.

But customs data on Friday showed China's crude oil imports in January reached the third highest level on record as state refiners increased processing after several new refining facilities began operations.

Chinese demand could see a boost from strategic reserve purchases after an expected completion of two new strategic crude oil storage sites this quarter, the IEA said in its report on Friday.

IRAN TENSIONS SIMMER

Helping limit the oil market's losses were ongoing tensions between the West and Iran over Tehran's disputed nuclear program.

Sanctions are already affecting Iran's oil production and a fall in its output and exports is likely to accelerate, industry analysts say.

China on Friday said it would send a senior official to Tehran to discuss Iran's nuclear standoff with the West, and India indicated it would also weigh in, as two of Iran's key crude oil customers try to head off new sanctions already playing havoc with trade.

(Additional reporting by Gene Ramos in New York, Ikuko Kurahone in London and Francis Kan in Singapore; Editing by Marguerita Choy, David Gregorio, Dale Hudson and Bob Burgdorfer)