On the New York Mercantile Exchange, light sweet crude futures for delivery in September settled at USD91.59 a barrel by close of trade on Friday. On Thursday, prices hit USD93.25 a barrel, the highest since May 22.
For the week, crude oil futures jumped 4.45%, the third consecutive weekly advance. New York-traded crude prices are up nearly 15.5% since touching a low of USD77.27 a barrel on June 28.
Fears over Spain’s deteriorating fiscal health intensified after the yield on Spanish 10-year bonds jumped to 7.26% on Friday, rising above the critical 7% threshold widely considered unsustainable in the long run.
The move came after the indebted state of Valencia said it would seek financial help from Madrid. Spain’s government also cut growth forecasts for 2013 and said the economy would stay in recession next year.
Earlier Friday, euro zone finance ministers approved the terms of a loan of as much as EUR100 billion to recapitalize Spanish banks.
Oil traders pay close attention to developments surrounding the euro zone’s debt woes, amid worries that the region’s sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
The news prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the dollar and U.S. Treasuries.
The euro sunk to the lowest level since June 2010 against the U.S. dollar, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.75% to settle the week at 83.61.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
Oil prices were boosted earlier in the week, touching an eight-week high on Thursday amid renewed fears over escalating violence in Syria and lingering tensions between Iran and the West.
Israeli Prime Minister Benjamin Netanyahu blamed Tehran for a deadly bomb attack on a bus packed with Israeli tourists in a Bulgarian resort town Wednesday that killed six people and injured 30 others.
U.S. oil prices hit a high of USD110.53 on March 1, at a time when tensions between Iran and the West over Tehran’s disputed nuclear program were running high.
Oil prices were also underpinned as market participants focused on testimony by Federal Reserve Chairman Ben Bernanke amid speculation that weak economic data out of the U.S. would prompt a third round of quantitative easing by the U.S. central bank.
In testimony on the economy, Bernanke said growth had lost momentum in the first half of the year and added that progress on cutting the U.S. unemployment rate was “frustratingly” slow.
However, he refrained from indicating whether a fresh round of stimulus was imminent, but reiterated that the central bank was prepared to take further action to support the economic recovery if necessary.
Despite the lack of details from the Fed Chairman, markets still anticipate easing on the part of the Fed later this year.
The U.S. is the world’s largest oil consumer.
Oil prices have also been supported by ongoing expectations that policy makers in China will introduce further stimulus measures to boost growth in the world’s second largest oil consumer.
There are expectations in the market that China will cut its banks’ reserve requirement ratio to boost lending and support economic growth.
The Asian nation is the world’s second largest oil consumer behind the U.S. and has been the engine of strengthening demand.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery settled at USD106.71 a barrel by close of trade on Friday.
The Brent contract added 4.05% over the week, while the spread between the Brent and the crude contracts stood at USD15.12 a barrel by close of trade Friday.
London-traded Brent prices hit USD108.17 a barrel on Thursday, the highest since May 23.
Brent prices have been well-supported in recent weeks, rallying nearly 15% from the lows touched in June, amid growing concerns over tightening supplies from Norway, outages in the North Sea region and following the launch of Western-led sanctions targeting Iranian oil exports on July 1.
In the week ahead, market participants will be anticipating Friday’s report on U.S. second quarter economic growth, in order to gauge the strength of the country’s recovery.
Market participants will also be focusing on developments in Spain, while euro zone data on manufacturing and service sector activity will be closely watched amid fears of the impact of the regions debt crisis on economic growth.
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