Crude Gains as Europe Debt Fears Wane

Crude futures rose Friday, settling at the highest level in nearly four months as fears about Europe's debt crisis waned and traders remain focused on falling oil inventories.

Light, sweet crude for December delivery settled $1.21, or 1.2 percent, higher at $98.99 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 91 cents higher at $114.04 a barrel.

After a sharp rally Thursday, traders resumed the push toward triple-digit oil prices Friday amid some hopeful signals on Europe's debt crisis.

Yields on Italian bonds fell as the country's senate approved a 2012 budget bill that sets fiscal targets and offers longer-term measures aimed at boosting economic growth. The vote, if repeated in the lower house Saturday, paves the way for Prime Minister Silvio Berlusconi to step down and raises hopes that Italy can meet its debt obligations.

Italian bond yields dropped below 7 percent from a euro-era high of 7.45 percent on Wednesday. The 7 percent yield level is a key psychological threshold, as Greece and Portugal took bailouts soon after crossing that mark.

"From one day to the next, it's these swings of optimism to pessimism. That's going to be the same going forward," said Tom Bentz, director at BNP Paribas Prime Brokerage Inc. "We're going to constantly be worried about the global economy and how Europe fares over the next few months."

Oil prices are up 24% since the beginning of October despite the spreading threat of debt problems in Greece, Italy and other euro-zone countries. Declining oil and fuel inventories in the U.S. coupled with improving economic data have convinced many investors that demand is set to grow.

"We are headed right back up to $100 and the U.S. economy is taking us there," said Carl Larry, head of Oil Outlooks and Opinions.

U.S. stockpiles of distillates, which include heating oil and diesel, fell by 6 million barrels last week and are 6.9 percent below five-year average levels.

Still, some traders remain cautious as prices approach the key $100 level. Economic growth has been slowing in China, the world's largest energy consumer. And Europe's debt issues are far from resolved.

"Even though the fundamentals are improving, it doesn't look like this European problem is going away," said Peter Beutel, president of Cameron Hanover. "Every week there is some new emergency."

Front-month December reformulated gasoline blendstock, or RBOB, settled 3.30 cents, or 1.3%, lower at $2.6038 a gallon. December heating oil settled 2.05 cents, or 0.7%, higher at $3.1716 a gallon.