July 22, 2011 / 8:31 AM / 6 years ago

Brent crude rises above $118 on spread buying

<p>Pumps are seen at a gas station in Tokyo June 24, 2011.Kim Kyung-Hoon</p>

NEW YORK (Reuters) - Brent crude oil jumped 1 percent to top $118 in light trade on Friday, buoyed by Europe's latest agreement to bail out Greece and by spread buying which widened the gap between London and U.S. crude.

U.S. products, including heating oil and gasoline, rose alongside Brent, helping push U.S. crude to six-week highs, though gains were tempered by uncertainty over talks to avert an unprecedented U.S. default.

The spread buying was a reversal from the selling seen late the previous session, when Brent fell after an aggressive sell off in gasoline and spreads fed by U.S. demand concerns, market players said.

"A lot of what we are seeing today is spread related. From the WTI perspective you will see that Brent and U.S. products are strong and that is pulling U.S. crude up," said Tim Evans, analyst, Citi Futures Perspective, New York

The Brent futures contract for September rose $1.16 to settle at $118.67 a barrel. U.S. crude rose for a fourth straight session, settling up 74 cents at $99.87 a barrel, its highest close in six weeks.

As during Thursday's session, oil briefly rose above $100 but failed to retain those gains.

For the week, U.S. crude futures rose $2.63, a fourth straight week of gains, while Brent rose $1.14, rebounding from the previous week's losses.

Trading volumes were thin. At 4.38 p.m. EDT, U.S. crude traded contracts were 37 percent below the 30-day average, while Brent volume was down 57 percent from the 30-day average.

With markets watching the debt ceiling debates, President Barack Obama said any deficit-cutting deal must be crafted to avoid denting economic growth, warning another recession would be "the worst thing" for U.S. fiscal health.

"The U.S. debt ceiling crisis hasn't been solved and there has been mixed economic data, so that might not be enough to keep crude above $100," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Analysts and traders said the preliminary solution to the euro zone debt crisis presented in Brussels on Thursday was still providing some support for Brent.

The oil market shrugged off weakness on Wall Street and a stronger dollar which can pressure crude prices.

The Dow fell on Friday after poor results from Caterpiller and Microsoft, while the euro slipped against the dollar as investors focused on how the second rescue package for Greece and measures to stop the European debt crisis from spreading will be implemented. .N <USD/>

Additional reporting by Claire Milhench and Francis Kan in London; Editing by David Gregorio

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