US oil prices drifted lower on Friday as a plunge in US home sales added to festering economic worries, erasing much of the day's earlier gains sparked by a weaker dollar.
Industry data showed pending sales of existing US homes fell more than expected in April to hit a seven-month low, dashing hopes for a recovery in the vital housing market.
Also read: Oil pares gains after US home sales dataThe report capped the week's series of disappointing news about the economy that has kept US crude shackled near USD 100, after recovering from a USD 20 fall three weeks ago.
"The weak home sales data signifies the US economy is sputtering rather than improving nicely," said Gene McGillian, analyst, at Tradition Energy, in Stamford, Connecticut.
"US crude has hit over USD 100, but is having a hard time moving further up because of economic uncertainty," he added.
By 2 pm EDT (1800 GMT), US crude for July delivery was down 1 cent at USD 100.22 a barrel, after hitting an early high of USD 101.24. In London, ICE July Brent dipped 14 cents to USD 114.91.
The shaky trajectory in oil prices has kept the Reuter-Jefferies CRG index, a global benchmark for commodities, modestly up 0.6% for a third week of gains. But the index was set to end the month down more than 7% after the plunge in many commodities in early May.
Oil futures were under pressure also as OPEC oil output was expected to have increased this month due to extra oil from Saudi Arabia, Nigeria and Iraq, according to a Reuters survey.
Supply from all 12 members of the Organization of the Petroleum Exporting Countries is expected to average 28.90 million barrels per day this month, up from a revised 28.79 million bpd in April, the survey of oil companies, OPEC officials and analysts found.
US gasoline up, mideast tensions watched
US gasoline futures gained for the sixth straight session, hitting their highest level in two weeks on news of an overnight shutdown of three refineries in Texas City, Texas, due to a city-wide power outage.
By midmorning Friday, the refineries, which account for 4% of US refining capacity, had restarted operations, after power was restored.
US gasoline for June delivery traded up 3.90 cents at USD 3.0873 a gallon, after extending the day's high to USD 3.0902.
High pump prices for US gasoline has constrained consumer spending, keeping the economy in a sluggish growth path. That has raised questions over demand in this year's summer driving season, when it usually peaks. The season ushers in this weekend and tapers off during the Labor Day weekend in September.
In afternoon trading, the dollar stood 0.77% lower against a basket of currencies as the euro rose on comments that financially ailing Greece was likely to cope with its heavy debt.
In early trading, the euro rallied against dollar after European Central Bank Governing Council member George Provopoulos said Greece will be able to repay its debt in full without restructuring if it sticks to an austerity plan.
Investors kept watch over tensions in the Middle East and North Africa, especially after news that Russia was ready to mediate in the Libyan crisis following its partners in the Group of Eight.
On Thursday, data showed the US economy expanded at an unrevised 1.8% annual rate in the first quarter of 2011, less than expected, while corporate profits shrank and weekly jobless claims rose, sparking oil's decline of more than 1%.
