Oil Holds Above $95, Up More Than 2% On Week

Crude-oil futures held their ground above $95 a barrel Friday to gain more than 2% for the week as the International Energy Agency raised its forecast for oil demand this year and China’s economy grew more than expected in the fourth quarter.

Crude for February  tacked on 7 cents, or 0.1%, to settle at $95.56 a barrel on the New York Mercantile Exchange. Prices stayed in a tight range Friday between $94.91 and $95.67 a barrel.

Nymex floor trading will be closed Monday for the Martin Luther King, Jr. holiday.

Oil saw slight weakness from “some profit taking due to the [recent] run up and the strength in the U.S. dollar,” said Tariq Zahir, managing member at Tyche Capital Advisors, in an email.

The ICE dollar index  traded at 79.994, up from late Thursday’s 79.691. Strength in the greenback tends to pressure prices for dollar-denominated commodities.

Zahir also said that lower numbers on U.S. consumer sentiment put some pressure on oil prices Friday.

A report from the University of Michigan-Thomson Reuters showed that the U.S. consumer-sentiment gauge declined to 71.3 in a preliminary January reading from a final December level of 72.9. See: Consumer sentiment declines in January.

Overall, oil prices have done well this week, finishing 2.1% above last Friday’s $93.56.

“Sentiment amongst market players has clearly changed since the turn of the year, on evidence or expectations of rising demand for the black stuff,” said Fawad Razaqzada, technical analyst at GFT Markets, in a note.

The IEA has “delivered a surprise finding on the supply of oil,” he said, pointing out that the agency said in its monthly report that “all of a sudden, the market looks tighter than we thought.”

“If the IEA is correct, then both the supply and demand forces are pointing towards higher oil prices in the near term,” said Razaqzada.

The IEA on Friday raised its forecast for oil demand for 2013 by 240,000 barrels a day to 90.8 million barrels a day, citing expectations of higher demand from China, the world’s second largest oil consumer. See: IEA sees rising 2013 oil demand driven by China.

“The supply outlook has also been raised, but not to quite the same degree as demand, as we acknowledge we were previously too conservative on the U.S.,” said Matthew Parry, senior oil-market analyst at the IEA, in an email comments.

Meanwhile, data from China showed that the nation’s economy grew by 7.9% in the fourth quarter, compared with a year earlier. Economists expected growth of 7.8%, according to separate surveys by Dow Jones Newswires and Reuters. See: China’s economy grows more than expected.

Algeria conflict

Oil prices climbed 1.3% Thursday, briefly touching highs above the $96 level, after the Algerian military launched a strike on militants holding a number of local and foreign hostages. See: Oil briefly tops $96 in wake of Algeria attack.

Algerian state media reported that Algerian special forces freed 650 hostages from Islamist militants on Friday, according to CNN, but the fate of some foreign workers remained unclear.

“The threat to [Algeria’s] energy facilities is sending shivers across Europe, as Algeria is the number three supplier of [natural] gas to Europe and a supplier of high quality sweet crude oil,” said Phil Flynn, senior market analyst at Price Futures Group.

Brent crude, the rival European benchmark, saw its March contract  rise 79 cents, or 0.7%, to end at $111.89 a barrel on ICE Futures in London. It climbed 1.9% for the week.

Elsewhere in the energy complex, February gasoline  rose 3 cents, or 1%, to $2.80 a gallon, up 2.1% for the week, while February heating oil  rose 3 cent, or 1%, to $3.05 a gallon, adding more than 1% from last Friday.

February natural gas climbed 7 cents, or 2.1%, to end at $3.57 per million British thermal units, ending 7.2% higher for the week. Prices climbed 1.7% Thursday after U.S. government data showed a larger-than-expected draw in last week’s natural-gas supplies.

Marketwatch