Oil futures were up slightly around midday Friday, though earlier gains spurred by news that Iran had occupied an Iraqi oil well were pared as the U.S. dollar strengthened.
Oil futures were up slightly around midday Friday, though earlier gains spurred by news that Iran had occupied an Iraqi oil well were pared as the U.S. dollar strengthened.

Light, sweet crude for January delivery recently traded 36 cents, or 0.5%, higher at $73.01 a barrel on the New York Mercantile Exchange, having touched an intraday high of $74.69 a barrel. Brent crude on the ICE futures exchange traded 13 cents, or 0.1%, lower at $73.24 a barrel.

"The rally ran out of steam due to the impact of the dollar," said Tom Bentz, analyst and trader with BNP Paribas in New York . "In general, the market reacted to Iran but struggled to keep going."

The dollar surged Friday, pushing the euro below $1.43 for the first time in over three months. Oil tends to fall on a stronger dollar as this makes the dollar-denominated commodity more expensive to other currency holders.

This erased much of the $2 a barrel rally earlier in the session that was caused by news that Iran had occupied an Iraqi oil well. Traders had bought back contracts they had previously sold, nervous that oil prices could rise even further.

Iranian forces took hold of an Iraqi well in a disputed section of the border after opening fire against Iraqi oil workers, an official from state-run Missan Oil Co. told Dow Jones Newswires.

But the official said the incident happened two weeks ago, when around 10 to 11 Iranian troops occupied well 4 in the al-Fukka oil field. There were no casualties reported.

There were conflicting reports earlier in the day about whether the incursion had actually taken place, but "if you hear rumors going into a weekend, you will not take a chance," said Phil Flynn, analyst with PFG Best in Chicago .

Incidents involving Iran tend to rattle the oil markets due to concerns over the possibility of a disruption to oil supply. In the past, Iran has threatened to block the Strait of Hormuz , a key waterway from the Persian Gulf through which 40% of the world's maritime oil shipments go through.

Yet recent international tensions with Iran - mainly concerning its nuclear program -have had only a minor impact on oil prices, as the massive level of oil inventories globally have allayed any worries about Iran cutting off supply.

Oil prices were also gleaning some support from a cold snap across Europe and the U.S. , with market participants hopeful that this may boost heating oil demand and start to draw down the massive overhang of distillate stocks, a category that includes heating oil and diesel.

Front-month January reformulated gasoline blendstock, or RBOB, recently traded 86 points, or 0.5%, higher at $1.8606 a gallon. January heating oil recently traded 32 points, or 0.2%, lower at $1.9542 a gallon.

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