Crude oil futures - Weekly outlook: March 18 - 22

                       New York-traded crude oil futures rose to a three-week high on Friday, as upbeat U.S. economic data added to the view that the nation’s recovery was gaining momentum, lifting hopes for higher oil demand.

An improving economy is generally correlated with increased demand for oil and fuel products like gasoline.

The U.S. is the world’s biggest oil consuming country, responsible for almost 22% of global oil demand.

On the New York Mercantile Exchange, light sweet crude futures for delivery in April rose 0.6% Friday to settle the week at USD93.58 a barrel by close of trade.

Nymex prices rose to as high as USD93.82 earlier in the day, the strongest level since February 25. On the week, New York-traded oil futures tacked on 1.85%, the second consecutive weekly gain.

In the U.S., data on Friday showed that industrial production rose by 0.7% in February, beating expectations for a 0.4% increase.

The data came after the Federal Reserve Bank of New York said that its index of manufacturing activity declined less-than-expected to 9.2 in March from a reading of 10.0 the previous month.

The mostly upbeat data overshadowed disappointing U.S. consumer confidence data. The University of Michigan’s consumer sentiment index dropped to 71.8 in March, the lowest level since December 2011, from a final reading of 77.6 in February.

Oil prices were also supported after U.S. inflation data indicated that the Federal Reserve had sufficient scope to continue its quantitative easing program to further boost the economy.

The Labor Department reported that U.S. consumer price inflation rose 0.7% in February, bringing the annualized rate of consumer inflation to 2.0%. Core consumer prices, which exclude volatile food and energy costs, also rose 2% year-on-year.

Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories.

In December, the U.S. central bank said an “exceptionally low” target interest rate is appropriate as long as inflation isn’t forecast to rise to more than 2.5%.

The U.S. dollar came under broad selling pressure as expectations grew the Federal Reserve would keep its loose monetary policy.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.6% on Friday to end the week at 82.34, the weakest level since March 8.

Dollar-denominated oil futures contracts tend to rise when the dollar falls, as this makes oil cheaper for buyers in other currencies.

In the week ahead investors will be focusing on Wednesday’s Federal Reserve policy statement, amid speculation over an earlier-than-expected end to the bank’s asset purchase program.

Fed Chairman Ben Bernanke is to give a press conference after the release of the policy statement.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for April delivery climbed 1% Friday to settle the week at USD110.08 a barrel.

The London-traded Brent contract eased up 0.1% over the week, while the spread between the Brent and the crude contracts narrowed to USD16.50 a barrel.

The gap between the two contracts narrowed to a seven-week low on Wednesday after U.S. government data showed supplies at Cushing, Oklahoma, the delivery point for Nymex futures, fell the most since May 2011 last week.