| NEW YORK
NEW YORK Oil prices closed little changed on Friday after light, tug-of-war trading, as hopes for additional easing by the Federal Reserve to boost a sputtering U.S. recovery countered concerns about economic growth.
Brent edged lower and U.S. crude rallied late, reducing Brent's premium to its U.S. counterpart, while both contracts posted their second consecutive weekly gains.
Prices felt pressure early, after ratings agency S&P downgraded Spain's credit rating, adding to economic concerns about the euro zone. Oil pared losses ahead of U.S. GDP figures that showed growth cooled in the first quarter.
Some investors believe slowing U.S. growth may prompt the Federal Reserve to launch a third round of government bond buying, or quantitative easing, known in markets as QE3.
"Bad news for the economy is being interpreted as good news for commodities because it may put QE3 back on the table," said Dominick Chirichella, senior partner at Energy Management Institute in New York. "Whether or not that trade has any longevity is not clear."
The dollar's weakness and strong equities on Wall Street added support for crude, along with a rise in U.S. consumer sentiment.
Brent June crude fell 9 cents to settle at $119.83, having traded in a range of $119.06 to $119.95. Brent had a nearly 1 percent weekly gain but remained on pace to post a more than 2 percent monthly loss.
U.S. June crude rose 38 cents to settle at $104.93, having reached $105 but stalling ahead of the 50-day moving average of $105.10. The weekly gain was 1.8 percent, on track for a similar monthly rise.
Brent's premium to its U.S. counterpart narrowed to end at $14.90 based on settlements, after reaching $15.64 intraday. The spread has been in a roughly $13-$16 range since the April 16 news of a mid-May reversal of the Seaway pipeline that should begin easing a U.S. Midwest bottleneck and shuttle crude to the refinery-rich Gulf Coast.
Trading volumes were very light, well under 30-day averages for Brent and U.S. crude.
The Chicago Board Options Exchange's Oil Volatility Index .OVX fell to a record low below 25 intraday. The index is a measure of implied volatility.
Money managers raised their net long U.S. crude futures and options positions in the week to April 24, the Commodities Futures Trading Commission said in a weekly report.
U.S. RBOB gasoline futures edged up in choppy trading, while heating oil dipped, as front-month May contracts approach expiration on Monday.
U.S. GROWTH SLOWS
U.S. economic growth cooled in the first quarter to a 2.2 percent annual rate, the government said in its advanced estimate, moderating from the fourth quarter's 3.0 percent.
The report followed a reiteration by the Federal Reserve on Wednesday of its intent to keep interest rates low. Fed chief Ben Bernanke said the central bank stood ready to move to support the economy if it faltered.
U.S. consumer sentiment inched up in April, putting the index at its highest since February 2011.
The dollar slumped to multi-week lows against the euro and yen on the possibility of more stimulus. A weaker U.S. currency can be supportive to dollar-denominated oil by making it less expensive to consumers using other currencies. <USD/>
IRAN AND SUPPLY DISRUPTIONS
The U.S. Energy Information Administration (EIA) said on Friday that global oil supply exceeded demand by 500,000 barrels per day over the last two months as Saudi Arabia lifted output, more than countering rising non-OPEC outages.
The report is required every 60 days by an Iran sanctions law enacted in December and was expected to allow the Obama administration to press ahead with sanctions.
This month's revived talks involving Iran and major powers about Tehran's disputed nuclear program eased the geopolitical fear premium in oil prices, but traders and analysts remain skeptical the talks will succeed and a European Union embargo on Iranian crude set for July looms.
Disrupted production in the North Sea, Yemen and Sudan and turmoil in OPEC member Nigeria have supported oil prices even as signs of slowing global economic growth, lackluster U.S. demand and rising stockpiles pulled crude prices off 2012 peaks reached in the first quarter.
(Additional reporting by Gene Ramos in New York, Claire Milhench in London and Luke Pachymuthu in Singapore; Editing by Alden Bentley, David Gregorio and Dale Hudson)