Oil price set for biggest weekly drop

Brent held above $118 per barrel on Friday, with prices headed for their steepest weekly drop in more than three months as fears that the euro zone debt crisis could flare up again dented the demand outlook. Disappointing data showing the number of Americans claiming unemployment benefits for the first time fell only slightly last week also capped gains in oil prices. Investors are now awaiting next week's meeting of US Federal Reserve policymakers, which will be closely scrutinized for any hints of a third round of monetary easing by the world's top oil consumer, which could have an impact on crude prices. Brent crude gained 34 cents to $118.34 a barrel by 6.58am UAE time, on track for its steepest weekly loss in 14 weeks. US crude gained 44 cents to $102.71, after settling lower at $102.27 in the previous session. "The Spain sovereign debt auction went rather well, but the European economy is still very unstable which is affecting Brent prices," said Yusuke Seta, a Tokyo-based broker at Newedge. Spain sold 2.5 billion euros in 2-and 10-year bonds, at the top end of the targeted amount, but yields on the key 10-year bond were higher, reflecting fears that it may miss budget deficit targets. But economists polled by Reuters said Spain and Italy would not need international bailouts as they battle through their debt crises, although their economic ills may drag the euro zone's recession into mid-year. According to technical charts, Brent may drop to $116.70 per barrel, Reuters market analyst Wang Tao said. US oil needs to drop below a support at $101.67 per barrel to confirm a target at $100.68, he added. U.S. crude remained supported on expectations that an oil glut in the US Midwest would ease with an earlier-than-scheduled plan to reverse the flow of the Seaway crude pipeline. "Expectations that the stockpile in Cushing will be moved to the US Gulf Coast is prevailing on the US crude prices over a bearish Brent market," Seta said. US crude stocks had jumped 3.9 million barrels in the week to April 13, substantially exceeding analyst expectations.