Oil prices push higher ahead of holiday weekend

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New York's main contract, light sweet crude for delivery in June, gained 84 cents to close at $112.29 a barrel.

In London, Brent North Sea crude for June delivery settled at $123.99 a barrel, a gain of 14 cents from Wednesday's closing level.

The modest price rises extended Wednesday's powerful rally and came as traders prepared for closed financial markets Friday on both sides of the Atlantic.

"The market is still very concerned about the value of the dollar," said Phil Flynn of PFG Best Research.

Dollar-priced commodities such as oil typically become more attractive investments when the US unit weakens.

"The overriding theme for energy this week has really been the risk to the dollar," Flynn said, citing Standard & Poor's warning Monday on US sovereign debt and rising interest rates in the eurozone and elsewhere.

By contrast, the Federal Reserve has maintained its ultra-low rate policy since December 2008.

On Wednesday, New York's benchmark West Texas Intermediate futures contract had surged more than $3 on a sharply weakening dollar.

The dollar hit a 16-month low against the euro Thursday and also weakened against the yen.

"Europe's debt crisis is speeding to a head, it is called 'restructuring' for those who can't see it as a default," said Mike Fitzpatrick of Kilduff Group.

"Consequently the high yields are pushing up the euro at the expense of the dollar which in turn is supportive for oil."

Political unrest boiling in the Middle East and North Africa region also kept crude oil prices higher.

But gains were limited Thursday after disappointing economic data in the United States, the world's largest oil-consuming nation.

Initial US unemployment insurance claims fell less than expected last week, while manufacturing growth in the Philadelphia region slowed.

President Barack Obama announced a probe into oil price fraud and speculation, hoping to limit a rise in gasoline pump prices that has energy-hungry Americans up in arms.

Pointing the finger at "speculators," Obama said a new Justice Department task force would "root out any cases of fraud or manipulation" that may have caused higher prices.

"We are going to make sure that nobody is taking advantage of American consumers for their own short-term gain," Obama said at a town hall meeting in Reno, Nevada.

Americans have seen oil prices rise over eight per cent in the last month. The average gallon now costs 35 per cent more than it did a year ago.