Oil pauses amid simmering geopolitical tensions

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Prices for WTI crude for March delivery on the New York Mercantile Exchange fell 16 cents to $86.20 from late Thursday, ahead of a three-day weekend and the contract's expiry Tuesday.

In London, Brent North Sea crude for April delivery gave up five cents to end trade at $102.52, after again pushing well past $104 on Middle East worries.

WTI prices fell into negative territory just before the close after trading higher most of the day.

John Kilduff of Again Capital said traders had been eying the transit of two Iranian navy vessels through the Suez Canal to the Mediterranean, which top Israeli officials had labeled provocative and hostile.

"It seems to be a perception issue over what this Iranian naval cruise to the Suez Canal represents for the stability of the region," he said.

"Some details have emerged it is not necessarily as provocative as initially feared."

Traders also had hopes that the violence in Bahrain, in the crucial oil-producing Gulf, would end with the crown prince's call for talks with protesters, Kilduff said.

"This is how things evolved in Egypt," he said.

The huge spread between Brent and WTI continued to transfix the market. The two key factors -- Middle East political turmoil pushing up prices in Europe, while excess stockpiles due to transport bottlenecks pushing US prices down  remain in place.

But some analysts at JPMorgan said they expect the gap to narrow.

"If the spread gets wide enough, all sorts of innovative alternative methods will be brought into play to move the oil," they said in a report Friday.

"These will take time to set up, and will be price-sensitive, but there is every reason to believe that they will contribute to clearing this market."