Oil falls on Greece deal doubts

Oil prices fell on Friday, after an eight-day rally for Brent crude, as the latest hitches in negotiations on a Greece bailout package pressured the euro and equities.

A reduced oil demand growth forecast from the International Energy Agency (IEA), the sixth consecutive monthly report with diminished growth expectations, also helped pressure oil.

The euro fell and the dollar index strengthened after the leader of the far-right party in Greece's coalition declined to back a bailout agreement, raising concerns once again about the risk of a default.

The euro had been pressured earlier after euro zone finance ministers sought further measures from Greece before signing off on a 130 billion euro ($171.46 billion) bailout package.

Both Brent and US crude remained on track to post a weekly gain.

Brent March crude futures fell $1.27 to $117.32 a barrel by 1:03 pm EST, having fallen as low as $116.29. The pullback follows Brent's close at $118.59 on Thursday, its highest settlement since late July.

US March crude, after three consecutive higher settlements, was down $1.44 at $98.40 a barrel, having fallen as low as $97.32. US crude needs to close above $97.84 to end higher on the week.

Brent's premium to US crude strengthened slightly, hovering near $19 a barrel.

A retreat ahead of the weekend, after the sharp rise in Brent prices over the past eight sessions, was not unexpected after its Relative Strength Index pushed above 70 this week, signalling an overbought condition for investors watching technical indicators.

"The market has paused for breath after its sustained rally," Mark Thomas, head of European energy at brokerage Marex Spectron in London, said.

IEA trims demand growth view
Global oil demand will grow by less than 1 per cent in 2012, the IEA said in its monthly oil report, saying a weak global economy may limit demand growth this year.

The agency, which provides energy advice to the world's most industrialised nations, cut its 2012 global oil demand growth forecast by 250,000 barrels per day (bpd) to 800,000 bpd.

IEA's view followed monthly reports from Opec and the US Energy Information Administration, with Opec lowering its demand growth forecast because of economic weakness in Europe and the US, while EIA raised its expectations, if by only 50,000 bpd, the first boost since October.

Fragile China
China betrayed signs of slowing domestic demand as data showed imports slipping to their lowest in more than two years and weaker-than-forecast bank lending.

But Customs data on Friday showed China's crude oil imports in January reached the third-highest level on record, as state refiners increased processing after several new refining facilities began operations.

Chinese demand could see a boost from strategic reserve purchases after an expected completion of two new strategic crude oil storage sites this quarter, IEA said in its report on Friday.

Iran tensions simmer
The tensions between the West and Iran over its disputed nuclear programme remained supportive for oil prices, analysts and brokers said.

Sanctions are already affecting Iran's oil production and a fall in its output and exports is likely to accelerate, industry analysts say.

China on Friday said it would send a senior official to Teheran to discuss Iran's nuclear standoff with the West, and India indicated it would also weigh in, as two of Iran's key crude oil customers try to head off new sanctions already playing havoc with trade.