UPDATE 7-Oil sinks, Brent headed for first weekly loss since Jan

Fri Feb 15, 2013 8:55pm GMT

* U.S. industrial output contracts unexpectedly
    * G20 divided over economic policy

 (Updates with settlement prices)
    By Gabriel Debenedetti
    NEW YORK, Feb 15 (Reuters) - Oil prices sank on Friday and
Brent futures finished their first negative week since
mid-January after an unexpected dip in U.S. industrial
production spurred concerns about lagging economic activity.
    Industrial production dipped 0.1 percent last month after a
revised 0.4 percent gain in December. Economists had been
expecting a modest increase in industrial output in January.
 
    U.S. crude prices also fell hard as traders sold positions
ahead of the U.S. holiday weekend.
    "We gave (U.S.) oil many chances to get above $98 and test
$100 a barrel. And it becomes a situation where we can't rally,
so we sell it," said Richard Ilczyszyn, chief market strategist
at iitrader.com LLC in Chicago.
    Brent futures for April delivery tumbled to a low of
$116.28 per barrel, down $1.72, before recovering to settle off
34 cents at $117.66. The contract ended the week down $1.24 or 1
percent, its first loss since the week ending Jan 13. 
    U.S. crude shed $1.45 to settle at $95.86 per barrel.
For the week, U.S. crude managed a small gain of 14 cent a
barrel.
    Wednesday saw a record in open interest for West Texas
Intermediate futures, as CME Group Inc said on Thursday
it had reached 1,665,014 contracts. 
    Broader commodities markets were hit hard on Friday, as gold
 fell to a six-month low, with a slate of economic figures
suggesting the world economy would not expand as rapidly as
anticipated.
    "All commodities are selling off hard," said Carsten
Fritsch, senior oil and commodities analyst at Commerzbank in
Frankfurt. "This data is worse than most economists had been
expecting."
    Not all U.S. economic signs were negative on Friday. U.S.
consumer sentiment improved in February, buoyed by signs of
increased hiring, though worries heightened about a decline in
future income, a Thomson Reuters/University of Michigan survey
showed. 
    But global growth prospects were clouded by expected
divisions at a meeting in Moscow of finance officials from the
Group of 20 nations, 90 percent of the world's economy, over
economic policy and its impact on currencies. 
    Economists are worried that competitive devaluations could
lead to currency wars, impoverishing nations worldwide.
 
    A floor under oil prices was maintained with supply concerns
stemming from worries over Iran's nuclear program. Talks between
Iran and the United Nations appear to have failed as inspectors
returned from talks in Tehran with no deal on reviving a nuclear
investigation and no date for a new meeting. 
    Reuters also reported on Friday that major powers plan to
offer to ease sanctions barring trade in gold and other precious
metals with Iran in return for Iranian steps to shut down a
newly expanded uranium enrichment plan, Western officials said.
 
    Concerns that the conflict could curb oil supply had eased
slightly after the Middle Eastern nation appeared to be taking
steps to slow the growth of stockpiles of nuclear materials that
could be used to make a bomb.
    A collision involving two barges late on Thursday resulted
in a small oil spill of four to eight barrels near Baton Rouge,
Louisiana on the Mississippi River, the United States Coast
Guard said. Vessel traffic was unaffected. 
 

 (Additional reporting by Edward McAllister in New York,
Christopher Johnson in London and Ramya Venugopal in Singapore;
Editing by Jane Baird, Nick Zieminski and Alden Bentley)