* Dollar weakens on tame inflation data, supports oil
* Worries on Iran, supply disruption, lift oil
* Saudi sending more crude to United States
* Coming up: API oil data 4:30 p.m. EDT Tuesday
(Adds CFTC data in last paragraph)
By Robert Gibbons
NEW YORK, March 16 (Reuters) - Oil prices rose more
than 2 percent on Friday on support from the continuing tensions
over Iran's disputed nuclear program and the potential for
supply disruptions in the region along with the weaker dollar.
Crude futures posted marginal weekly losses, but were up on
Friday after slumping the previous session on news the United
States and Britain were preparing a release from strategic oil
reserves later this year.
The dollar slumped after a report on U.S. consumer prices,
which investors viewed as reducing the likelihood of the Federal
Reserve tightening monetary policy anytime soon.
U.S. consumer prices rose the most in 10 months in February
as the cost of gasoline spiked, but there was little sign that
underlying inflation pressures were building.
"The reasoning is that the Fed will not be as likely to pull
back on stimulus or raise interest rates, so the dollar weakened
and that pushed up oil, along with the uncertainty about Iran
and the SPR," said Phil Flynn, analyst at PFGBest Research in
Chicago.
U.S. gasoline and heating oil also rose
sharply, tagging along as Brent crude moved higher and boosted
by news that Enterprise Products Partners shut a U.S.
Gulf Coast-to-Midwest refined products pipeline because of a
valve leak.
Brent May crude rose $3.21 to settle at $125.81 a
barrel, surging above its 20-day and 10-day moving averages and
reaching $126.10 ahead of the close. For the week, Brent fell a
mere 17 cents.
U.S. April crude rose $1.95 to settle at $107.06 a
barrel, reaching $107.25 and also pushing above its 10-day and
20-day moving averages. For the week, U.S. crude dipped 34
cents.
Brent's premium to U.S. crude , now comparing May
contracts, ended at $18.23 a barrel based on settlements.
Trading volumes in both contracts were lackluster. Brent's
volume was 34 percent below its 30-day average, with U.S. crude
27 percent below its 30-day average, with less than two hours
left for post-settlement trading.
Oil briefly trimmed gains on news that Saudi Arabia is
preparing to extend this year's unexpected surge in oil sales to
the United States.
Contrary to expectations that the modest recent rise in
Saudi Arabia's output was bound for fast-growing Asian markets
that also might need to replace barrels from Iran, preliminary
data shows that shipments to the United States have without
fanfare risen 25 percent to the highest level since mid-2008.
U.S. CORE INFLATION EYED
The Labor Department said the Consumer Price Index rose 0.4
percent in February and that gasoline accounted for more than 80
percent of the rise. But excluding the food and energy
categories, inflation pressures were generally contained, with
the core CPI edging up only 0.1 percent.
Oil investors shrugged off a dip in U.S. consumer sentiment.
Analysts attributed this to the survey's director indicating
that $4 a gallon gasoline did not have the "shock value" it had
in previous fuel price surges.
U.S. consumer sentiment dipped in early March as rising
gasoline prices pushed Americans' inflation expectations for the
next year higher, the Thomson Reuters/University of Michigan's
preliminary reading on consumer sentiment showed.
IRAN AND RESERVE RELEASES
European Union diplomats are debating whether to exempt some
insurers from a ban on dealing with Iranian oil shipments after
Asian oil importers lobbied for exceptions to ensure oil
deliveries, government and industry sources said on Friday.
The diplomatic wrangling comes ahead of an EU foreign
ministers meet on March 23 and an EU ban on importing Iranian
oil slated for July.
"Spare capacity is really very tight, and any natural
disaster or problem in the Middle East could be a real problem,"
said Rob Montefusco, an oil trader at Sucden Financial,
highlighting supply stoppages in Syria, Sudan and elsewhere.
"No one wants to go home short at the weekend," he added.
A group of Democratic lawmakers in the U.S. House of
Representatives is urging President Barack Obama to aggressively
use the threat of releasing oil from the strategic petroleum
reserve (SPR) to rein in speculators the lawmakers believe are
driving up oil prices.
Money managers raised their net long U.S. crude futures and
options positions in the week to March 13, the U.S. Commodity
Futures Trading Commission said on Friday.
(Additional reporting by Gene Ramos in New York, Jessica Donati
in London and Randy Fabi in Singapore; Editing by Lisa Shumaker
and Bob Burgdorfer)
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