* EU working on contingency plan for Greece exit
* Seaway oil to flow this weekend after reversal
* Investors eye weekend G8 meeting, Iran nuclear talks next
* Coming up: U.S. June crude contract expiry Tuesday
(Adds CFTC data paragraph 15)
By Robert Gibbons
NEW YORK, May 18 Oil prices fell on Friday in
tug-of-war trading, posting a 2012 low and a third straight
weekly loss as debt problems in Greece and Spain kept concerns
about the euro zone economy in focus.
Crude futures felt pressure from news that European
officials were working on contingency plans in case Greece exits
the euro zone and from a ratings downgrade of 16 Spanish banks
by Moody's Investors Service.
Helping push oil lower early was data showing Chinese home
prices in April fell for a second month in a row from year-ago
"The problems in Europe, highlighted by the political
instability in Greece, remain as the primary factor for today's
slide in oil prices," said Kyle Cooper, managing partner at IAF
Advisors in Houston.
"There is also a factual realization that the Chinese
economy is slowing and that's bad for oil demand," Cooper added.
Position squaring after this week's expiration of Brent's
June contract and U.S. June crude options and caution ahead of
the weekend's Group of Eight meeting limited oil losses and
added to the choppy trading, traders and analysts said.
Also in focus is this weekend's planned start of crude oil
flows on the reversed Seaway pipeline.
The reversal is intended to ease a glut of crude in the U.S.
Midwest by bringing it via Seaway to the refinery-rich Gulf
Coast and reducing Brent's premium to its U.S. counterpart.
Brent July crude eased 35 cents to settle at $107.14
a barrel, having fallen to a 2012 low of $106.40, its lowest
intraday price since Dec. 21. For the week, Brent slipped 3.7
percent and the 10.59 percent loss in three weeks is the biggest
three-week percentage drop since the week to May 20, 2011.
U.S. June crude fell a sixth straight session,
dropping $1.08 to settle at $91.48, after tumbling to $91.08,
the lowest intraday price since Nov. 3.
U.S. crude fell 4.84 percent for the week. Three weekly
losses totaled 12.82 percent, the biggest three-week percentage
drop since the week to Aug. 14, 2011.
The U.S. June contract expires on Tuesday.
The choppy trading trajectories widened the Brent/U.S. crude
spread, with Brent's premium higher at $15.34 a barrel
CL-LCO1=R based on July contract settlements.
Tepid total crude trading volumes assisted the choppy
trading, with both Brent and U.S. turnover lagging their 30-day
Hedge funds and speculators cut their bullish crude oil bets
to the lowest level since late 2010 in the week to May 15,
cutting them by 12,789 after chopping them almost 82,000 lots in
the previous week.
U.S. RBOB gasoline futures managed a modest gain,
settling at $2.8895 a gallon, up 1.13 cents, after climbing back
above its 200-day moving average after ending the previous
session below that level for the first time since February.
Differentials for RBOB in the New York Harbor cash market
rose and were above the futures benchmark on Thursday on lift
from strong buying interest after a fire damaged a crude unit at
Sunoco's Philadelphia refinery last week, though it was slated
to restart on Wednesday.
Gasoline has tumbled from its $3.4455 a gallon peak 2012
peak reached March 29.
Gasoline stocks independently held in the
Amsterdam-Rotterdam-Antwerp oil hub jumped by 34 percent over
the past week, independent oil analyst Patrick Kulsen said,
citing improved refining margins for prompting higher
DIPLOMATIC WILD CARDS
In addition to addressing Europe's economic problems
stemming from the euro zone debt crisis at this weekend's G8
summit, U.S. President Barack Obama will seek support for
tapping strategic oil reserves ahead of the EU's July embargo of
Iranian crude, according to a Kyodo news report.
Success of such a diplomatic effort would add to pressure on
Iran, already feeling the pinch of tightening sanctions on its
crude oil exports, ahead of next week's scheduled talks with
major powers about Tehran's disputed nuclear program.
Higher production from Saudi Arabia and Iraq has already
helped countries seeking alternatives as they reduce purchases
of Iranian oil and has contributed to a sharp rise in U.S. crude
(Additional reporting by Gene Ramos in New York, Claire
Milhench in London and Florence Tan in Singapore; Editing by Jim
Marshall and Marguerita Choy)