NEW YORK (Reuters) - Oil prices rose on Friday, boosting world stock markets, after an energy organization said the oil market may have found a floor.
Brent crude oil registered a third straight week of gains after the report by the International Energy Agency, which also said production declines were picking up in the United States and other non-OPEC producers, and an increase in supply from Iran was less dramatic than expected.
Partly offsetting the bullish comments, Goldman Sachs lowered its crude oil price forecasts for this year and next year.
"So now it appears the two sides of the debate are set," said David Thompson at Washington-based commodities broker Powerhouse.
Brent LCOc1 rose 34 cents, or 0.9 percent, to settle at $40.39 a barrel, while U.S. crude CLc1 gained 66 cents, or 1.7 percent, to settle at $38.50. Both U.S. and Brent crude prices are up more than 40 percent from this year's lows.
U.S. stocks were sharply higher in afternoon trading and the three major indexes were on track for a fourth straight week of gains, helped by a jump in energy shares.
Optimism about the U.S. economic outlook added to the bullish tone, a day after the European Central Bank signaled it was unlikely to cut its negative interest rates further in the wake of a huge new stimulus plan.
MSCI's all-country world stock index .MIWD00000PUS gained 1.7 percent.
The Dow Jones industrial average .DJI was up 199.62 points, or 1.17 percent, to 17,194.75, the S&P 500 .SPX had gained 28.97 points, or 1.46 percent, to 2,018.54 and the Nasdaq Composite .IXIC had added 74.87 points, or 1.61 percent, to 4,737.03.
In Europe, shares rebounded after falling sharply Thursday on the ECB news. The pan-regional FTSEurofirst 300 index .FTEU3 ended 2.7 percent higher.
The euro EUR= dipped 0.2 percent against the dollar, a day after rallying on the ECB announcements.
ECB President Mario Draghi's suggestion that there would be no further interest rate cuts overshadowed the ECB's bold easing package. On Friday, ECB Governing Council member Erkki Liikanen said the central bank had not run out of tools to boost the economy and would continue to support it until it reaches its inflation target of almost 2 percent.
U.S. Treasury yields rose in choppy trading as investors bet the U.S. economy was healthy enough for the Federal Reserve to raise interest rates this year.
The benchmark 10-year note US10YT=RR yield rose to 1.970 percent, its highest in six weeks. It was last down 14/32 in price to yield 1.980 percent, up from 1.929 on Thursday.
Additional reporting by Barani Krishnan in New York and Marc Jones in London; Editing by Bernadette Baum and Nick Zieminski