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Oil ends mixed, U.S. crude posts second weekly gain

NEW YORK (Reuters) - U.S. crude oil prices finished higher on Friday, having wavered along with U.S. equity markets, while oil traders’ concerns about the danger of slowing Chinese demand and longer-term deepwater supply risks weighed on Brent crude and products.

A taxi driver re-fuels his taxi at a Shell petrol station in London March 16, 2010. REUTERS/Luke MacGregor

“The complex reversed patterns of the past couple of sessions as the crude curve strengthened and the crack (refined product to crude oil) spreads relinquished a significant portion of this week’s gains,” Jim Ritterbusch, president at Ritterbusch & Associates said in an afternoon note.

U.S. crude futures for July rose 39 cents to settle at $77.18 a barrel, after prices seesawed either side of their 200-day moving average ahead of the contract's expiration next Tuesday. (Graphic: link.reuters.com/puq72m)

U.S. crude prices gained for the second week in a low.

Front-month August ICE Brent futures fell 46 cents to settle at $78.22 a barrel, having traded as low as $77.25 earlier.

Front-end U.S. prices held firmer relative to products and longer-dated futures. On Thursday, products and profit margins surged on refinery glitches and signs of improving demand.

The approach of the U.S. July crude oil’s contract expiration helped support it. Volume on the July contract was light at about 139,300 contracts and open interest at the session’s start was only 77,148 contracts.

“But looking at the chart, we’re just seeing buying into the dips. The products slipped after the recent jump, people taking some profit ahead of the weekend,” said Richard Ilczyszyn senior market strategist Lind-Waldock in Chicago.

U.S. stocks ended higher after weathering volatility ahead of the expiration of stock options, posting back-to-back weekly gains. .N World stocks rose a ninth straight session.

U.S. crude oil prices fell as low as $75.56 a barrel on Friday after a central bank adviser in China said growth is expected to slow in the second half of 2010 and double-digit growth for the full year is unlikely.

That news knocked Shanghai stock markets -- which have often influenced sentiment in China-influenced commodities like oil and metals, although Hong Kong shares ended higher and posted their best week since April.

Copper fell a third consecutive day, hitting its lowest level in one week on weaker demand prospects.

The concerns about China came after U.S. data on Thursday showing weekly jobless claims increased and Mid-Atlantic factory activity growth braked to its slowest pace in 10 months.

LONGER-TERM RISKS

Prices of long-dated U.S. crude, which include contracts to December 2018, have remained fairly steady around $95 since BP's Deepwater Horizon explosion on April 20. (Graphic: link.reuters.com/fyf82m)

But possible effects on the industry from the Gulf of Mexico oil spill continues to be a factor, especially if it limits growth in deepwater oil supplies if tougher new regulations that increase costs are imposed.

While other producers have not joined the U.S. six-month ban on deep water drilling, analysts still expect some toll on supply and that concern has helped support far-forward oil prices and natural gas prices.

Deutsche Bank analyst Adam Sieminski said the combination of the drilling moratorium, tightened regulations and delays could defer deepwater Gulf of Mexico output by nearly 50,000 bpd in 2010 and 200,000 bpd in 2011.

The International Energy Agency’s Executive Director Nobuo Tanaka said the IEA estimates global offshore oil output could be reduced 800,000 to 900,000 barrels per day by 2015 if there is an extended global moratorium on new drilling similar to that in the U.S. Gulf of Mexico.

But Tanaka also cautioned the downside risk to the global economic recovery may prompt IEA to revise lower its demand growth forecast.

Editing by Marguerita Choy

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