NEW YORK (Reuters) - Oil prices rose toward $80 a barrel on Friday as refinery strikes in France and tensions about Iran’s nuclear program outweighed fears that U.S. monetary tightening could slow demand growth in the world’s largest oil consumer.
U.S. crude for March delivery rose 75 cents to settle at $79.81 a barrel, marking a 7.7 percent rise for the week, the highest one-week percentage gain for front-month crude since October. In London, ICE Brent crude for April rose 41 cents to $78.19 a barrel.
Workers at Total’s French refineries continued their strike action, raising concern about fuel supplies in the coming days.
Tension about Iran’s nuclear program also provided support. Russia’s foreign minister on Friday reportedly said that Moscow was very concerned about Iran’s lack of cooperation with the U.N nuclear agency.
“The refinery strike in France and concerns about Iran’s nuclear posturings are helping push up crude futures today,” said Daniel Flynn, analyst, PFGBest Research, Chicago.
Crude prices fell by more than $1 to a low of $77.76 a barrel earlier in the day, after the U.S. Federal Reserve raised its discount rate by a quarter percentage point to 0.75 percent late on Thursday, raising concerns about the repercussions of monetary tightening for energy demand.
On Friday the Fed poured cold water on speculation that a surprise hike to its emergency lending rate signaled a change in monetary policy.
“The Federal Reserve’s Dudley is trying to downplay yesterday’s discount rate hike, reassuring that it is not the beginning of tighter rate policy,” said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc in New York.
New York Fed President William Dudley said on Friday U.S. economic growth would likely be modest, keeping price pressures under wraps and enabling the central bank to keep benchmark interest rates ultra-low for an extended period.
Oil investors have looked to wider economic data over the past year for signs of economic recovery and a potential rebound in energy demand.
U.S. consumer prices rose just 0.2 percent in January -- a move that reassured investors that the loose monetary policy that has helped pull the world’s largest economy out of recession and stoked fuel demand was likely to last.
U.S. stocks rose on Friday as investors took the Fed announcement as further evidence that the economy is strengthening. .N
Oil prices have firmed gradually from lows of near $30 a barrel in December 2008 to the current range between $70 and $85 a barrel as low lending rates have spurred growth and encouraged investors to pour funds into commodities as a hedge against future inflation.
While the benchmark Federal funds rate was left unchanged at near zero, the decision to increase the rate the Fed charges banks for emergency loans raised concerns earlier that U.S. monetary policy could begin to shift.
Last Friday, China’s central bank said it would lift bank reserve requirements in an unexpected tightening move that could slow demand in the world’s No. 2 fuel consumer.
Additional reporting by Robert Gibbons and Gene Ramos in New York, Emma Farge in London, Seng Li Peng in Singapore; Editing by Walter Bagley
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