Oil slips and posts third weekly loss

NEW YORK (Reuters) - Oil prices fell on Friday in tug-of-war trading, posting a 2012 low and a third straight weekly loss as debt problems in Greece and Spain kept concerns about the euro zone economy in focus.

Crude futures felt pressure from news that European officials were working on contingency plans in case Greece exits the euro zone and from a ratings downgrade of 16 Spanish banks by Moody's Investors Service.

Helping push oil lower early was data showing Chinese home prices in April fell for a second month in a row from year-ago levels.

"The problems in Europe, highlighted by the political instability in Greece, remain as the primary factor for today's slide in oil prices," said Kyle Cooper, managing partner at IAF Advisors in Houston.

"There is also a factual realization that the Chinese economy is slowing and that's bad for oil demand," Cooper added.

Position squaring after this week's expiration of Brent's June contract and U.S. June crude options and caution ahead of the weekend's Group of Eight meeting limited oil losses and added to the choppy trading, traders and analysts said.

Also in focus is this weekend's planned start of crude oil flows on the reversed Seaway pipeline.

The reversal is intended to ease a glut of crude in the U.S. Midwest by bringing it via Seaway to the refinery-rich Gulf Coast and reducing Brent's premium to its U.S. counterpart.

Brent July crude eased 35 cents to settle at $107.14 a barrel, having fallen to a 2012 low of $106.40, its lowest intraday price since December 21. For the week, Brent slipped 3.7 percent and the 10.59 percent loss in three weeks is the biggest three-week percentage drop since the week to May 20, 2011.

U.S. June crude fell a sixth straight session, dropping $1.08 to settle at $91.48, after tumbling to $91.08, the lowest intraday price since November 3.

U.S. crude fell 4.84 percent for the week. Three weekly losses totaled 12.82 percent, the biggest three-week percentage drop since the week to August 14, 2011.

The U.S. June contract expires on Tuesday.

The choppy trading trajectories widened the Brent/U.S. crude spread, with Brent's premium higher at $15.34 a barrel based on July contract settlements.

Tepid total crude trading volumes assisted the choppy trading, with both Brent and U.S. turnover lagging their 30-day averages.

Hedge funds and speculators cut their bullish crude oil bets to the lowest level since late 2010 in the week to May 15, cutting them by 12,789 after chopping them almost 82,000 lots in the previous week.

U.S. RBOB gasoline futures managed a modest gain, settling at $2.8895 a gallon, up 1.13 cents, after climbing back above its 200-day moving average after ending the previous session below that level for the first time since February.

Differentials for RBOB in the New York Harbor cash market rose and were above the futures benchmark on Thursday on lift from strong buying interest after a fire damaged a crude unit at Sunoco's Philadelphia refinery last week, though it was slated to restart on Wednesday.

Gasoline has tumbled from its $3.4455 a gallon peak 2012 peak reached March 29.

Gasoline stocks independently held in the Amsterdam-Rotterdam-Antwerp oil hub jumped by 34 percent over the past week, independent oil analyst Patrick Kulsen said, citing improved refining margins for prompting higher production.

DIPLOMATIC WILD CARDS

In addition to addressing Europe's economic problems stemming from the euro zone debt crisis at this weekend's G8 summit, U.S. President Barack Obama will seek support for tapping strategic oil reserves ahead of the EU's July embargo of Iranian crude, according to a Kyodo news report.

Success of such a diplomatic effort would add to pressure on Iran, already feeling the pinch of tightening sanctions on its crude oil exports, ahead of next week's scheduled talks with major powers about Tehran's disputed nuclear program.

Higher production from Saudi Arabia and Iraq has already helped countries seeking alternatives as they reduce purchases of Iranian oil and has contributed to a sharp rise in U.S. crude oil inventories.

(Additional reporting by Gene Ramos in New York, Claire Milhench in London and Florence Tan in Singapore; Editing by Jim Marshall and Marguerita Choy)

lyrid meteor shower hippocrates andrew breitbart red wings willie nelson penguins the band