* Investors cautious after high yields at Spain bond auction
* Weak U.S. economic data stokes demand worries
* Global growth seen subdued, Reuters poll shows
By Jessica Jaganathan
SINGAPORE, April 20 (Reuters) - Brent crude held above $118 a barrel on Friday, but prices were headed for their steepest weekly drop in more than three months as Spain’s high borrowing cost kept intact fears that the euro zone debt crisis could flare up again.
Disappointing U.S. jobs data, which added to recent evidence the global economy is on shaky ground, dented the outlook for oil demand, capping gains in oil prices.
Investors are now awaiting next week’s meeting of U.S. Federal Reserve policymakers that will be closely scrutinised for any hints of a third round of monetary easing by the world’s top oil consumer, which could boost appetite for riskier assets including oil.
Brent crude gained 27 cents to $118.27 a barrel by 0653 GMT, but was on track for its steepest weekly loss since mid-January. U.S. crude gained 48 cents to $102.75, mostly unchanged from a week ago.
“The Spain sovereign debt auction went rather well, but the European economy is still very unstable which is affecting Brent prices,” said Yusuke Seta, a Tokyo-based broker at Newedge.
Spain sold 2.5 billion euros in 2- and 10-year bonds, at the top end of the targeted amount, but yields on the key 10-year bond were higher, reflecting fears it may miss its budget deficit target.
Economists polled by Reuters said Spain and Italy would not need international bailouts as they battle through their debt crises, although their economic ills may drag the euro zone’s recession into mid-year.
The global economy is set to expand by a modest 3.3 percent this year, slower than the International Monetary Fund’s 3.5 percent growth estimate, Reuters polls of more than 700 economists showed.
But in a sign that the Group of 20 developed and emerging economies has made progress in building up a global firewall to contain the euro zone crisis, Japan’s finance minister said the IMF is likely to achieve the touted $400 billion boost to its financial firepower as more countries signalled readiness to contribute funds.
“Oil traders continue to play the ‘growth evaluation game’ in trying to ascertain if the price of crude will have an extension of its stay above the psychological $100 mark over coming months,” Tim Waterer, senior trader at CMC Markets wrote in a note on Friday.
“Supply concerns have given way to question marks over future demand which has created the downward price pressure on oil in recent weeks.”
Brent may drop to $116.70 per barrel according to a Fibonacci projection analysis, Reuters market analyst Wang Tao said. U.S. oil needs to drop below a support at $101.67 to confirm a target at $100.68, he added.
Concerns about possible supply shortages as Western sanctions target exports from Iran drove Brent to above $128 a barrel in March, the highest since 2008.
But allaying these concerns was Saudi Arabia’s move to offer extra crude supplies to some of its existing customers probably because it has more available while its own refineries are undergoing maintenance.
U.S. crude remained supported on expectations that an oil glut in the U.S. Midwest would ease with an earlier-than-scheduled plan to reverse the flow of the Seaway crude pipeline.
“Expectations that the stockpile in Cushing will be moved to the U.S. Gulf Coast is prevailing on the U.S. crude prices over a bearish Brent market,” Seta said.
U.S. crude stocks had jumped 3.9 million barrels in the week to April 13, exceeding analyst expectations.