Brent crude rose on Friday as improved U.S. consumer sentiment and a weak dollar put it on course to snap a streak of three lower closes and to end the quarter with a 14 percent gain.
Crude prices extended gains on news that U.S. President Barack Obama has determined there is enough global oil supply to allow countries to cut Iranian imports, according to U.S. congressional and administration officials. That determination will allow Washington to move closer to sanction countries who still buy Iranian oil.
The euro edged up against the dollar and the yen as Spain's budget boosted hopes one of the euro zone's larger economies would tighten its belt. The dollar index was down 0.25 percent against a basket of currencies.
The euro had already strengthened against the dollar after euro zone finance ministers agreed to raise their financial firewall. A weaker greenback can lift dollar-denominated oil by making it less expensive for consumers using other currencies.
U.S. consumer confidence rebounded to its highest in 13 months in March as optimism about jobs and income overcame higher prices at the gasoline pump, according to the Thomson Reuters/University of Michigan's reading.
The consumer optimism and a separate report showing consumer spending in February increased by the most in seven months helped counter bearish data showing U.S. Midwest manufacturing activity slowed in March.
"The weak dollar and the euro boost off Europe's rescue fund increase and equities moving up all supported oil early and then there was a pull back after the Chicago PMI," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.
"Some end-of-quarter volatility should be expected during the day," Dillman said.
Brent May crude rose $1 to $123.39 a barrel by 2:06 p.m. EDT (1806 GMT), having swung from $122.58 to $124.07.
U.S. May crude moved up $1.07 to $103.85 a barrel, having traded from $102.82 to $104.15 and having slipped below the 50-day moving average of $103.50 intraday. U.S. crude was on track to post a near 5 percent gain for the first quarter.
Brent's premium to U.S. crude CL-LCO1=R was near flat in tug-of-war trading after rising to $20.15 a barrel intraday.
Total crude trading volumes were tepid, with turnover for both Brent and U.S. crude well under their 30-day averages.
U.S. April RBOB gasoline and heating oil futures had a choppy trajectory early, then pushed higher ahead of those front-month contracts' expiration at the end of Friday's session.
Gasoline was on pace to post a 26 percent jump for the quarter, matching the gain in the first quarter of 2011. The usual seasonal rally ahead of the U.S. driving season and several refinery shutdowns in the United States and the Atlantic basin have sent fuel prices higher.
Fears of supply disruption in the Middle East underpinned oil, but gains were capped by expectations that some Western nations will release strategic reserve stocks. Concern also remained over the untamed euro zone crisis.
"Prices are still very range-bound," said Amrita Sen at Barclays in London. "Overall prices are within a range, still constrained by fears on the upside of a release from the strategic petroleum reserve and on the downside by the strong fundamentals and geopolitical concerns."
IRAN AND OIL SUPPLY
Friday's oil price strength came despite a Reuters survey showing OPEC oil output rising in March to its highest since October 2008 as rising Iraqi and Libyan production offset lower production in Iran as importers scale back purchases from Tehran, a Reuters survey found.
Iran faces a European Union ban on its crude from July 1 as the West tightens sanctions in a dispute over Tehran's nuclear program. Reuters a week ago reported that exports were falling. (Additional reporting by Zaida Espana in London and Florence Tan in Singapore; Editing by Dale Hudson, Marguerita Choy nd Bob Burgdorfer)