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Oil rises, heads for weekly gain as Iran tensions support

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado February 2, 2015. REUTERS/Rick Wilking
An oil well pump jack is seen at an oil field supply yard near Denver, Colorado February 2, 2015. REUTERS/Rick Wilking

By Robert Gibbons

NEW YORK (Reuters) - Crude oil prices rose 2 percent on Friday, heading for a weekly gain on lift from lowered expectations that an agreement on Iran's nuclear program will result in a rapid return of more Iranian barrels to the market.

Strong U.S. refined products futures and data showing a lower U.S. drilling rig count this week also provided a boost.

Brent crude (LCOc1) was up $1.12 at $57.69 a barrel at 1:42 p.m. EDT, back above its 50-day moving average at $57.61.

U.S. crude (CLc1) was up 74 cents at $51.53.

After posting a loss last week, Brent was on track for its third weekly gain in four weeks and U.S. crude was on pace to post a fourth consecutive weekly rise.

"The latest agreement with Iran does not open the floodgates for a significant return of Iranian oil on the market as many had feared," said Harry Tchilinguirian, head of commodity markets strategy and oil strategy at BNP Paribas.

World powers and Iran announced the interim accord last week. But on Thursday, Iranian leaders said all sanctions on Iran must be lifted on the same day as any final agreement, while the United States maintains sanctions would be lifted gradually.

News this week of unsold Nigerian crude, the biggest jump in U.S. crude oil inventories since 2001 and record Saudi Arabian output in March, limited crude oil's rally. [EIA/S]

Brent's price has retreated from $115 hit last June, plunging after OPEC in November decided not to cut output, choosing to defend market share instead.

Crude received support this week from expectations of stronger demand after data from the United States and Germany bolstered the view that world growth is improving.

Baker Hughes (BHI.N) said the number of rigs drilling for oil in the U.S. fell by 42 to 760 this week, the 18th consecutive weekly drop, which also helped to lift oil prices. Producers have responded to the steep drop in oil prices over the last six months, idling nearly 800 rigs, or 50 percent, since a peak of 1,609 rigs in October.

Oil managed to rally even with a stronger U.S. dollar (.DXY), which tends to weigh on dollar-denominated commodities. [USD/]

U.S. ultra-low sulfur diesel futures (HOc1), trading over 2 percent higher, have been "scooping up some support off seasonal agricultural demand and steady export trade," said Jim Ritterbusch, president at Ritterbusch & Associates.

U.S. RBOB gasoline (RBc1) rose more than 2 percent as it recovers from a 12-cent plunge on Wednesday after government data showed an unexpected inventory rise last week.

(Additional reporting by Alex Lawler in London and Florence Tan in Singapore; Editing by Marguerita Choy)