Brent at 4-1/2 Month High; US Crude Up for 6th Week

New York: Oil prices diverged on Friday, with Brent hitting 4-1/2 month highs on continued fighting in Yemen while US crude fell on concerns of another upcoming stock build, though both benchmarks headed towards weekly gains.

Fighting between Yemen's warring factions raged in southern and central parts of the country and air strikes from a Saudi-led coalition hit Houthi militia forces, creating more tensions over the security of Middle East oil supplies.

A softer dollar also lent support to Brent and formed a floor beneath falling US crude prices.

Worries that crude stockpiles in the United States could hit a new record next week weighed on US crude, even as overall demand for oil and fuel products, especially gasoline, picked up ahead of the peak summer driving season.

"It's a push and pull situation with the Yemen tensions giving Brent support while US prices get pulled down as people steel themselves for another inventory rise next week," said John Kilduff, partner at New York energy hedge fund Again Capital.

Brent was up 27 cents at $65.12 a barrel by 1615 GMT (9:45 p.m. in India), after hitting a December 10 high of $65.80. Brent was headed for a third straight week of gains, adding nearly 3 per cent this week.

US crude fell 42 cents to $57.32 a barrel, retreating from Thursday's 2015 high of $58.41. It was on track for a sixth straight weekly gain, its longest such stretch since the first quarter of 2014. Like Brent, US crude was up 3 per cent for the week.

After a selloff between June and January driven by oversupply, oil prices seem to have found their footing in the last three months, gaining about 20 per cent in April.

Even so, oil producers and Wall Street are at odds on whether the slump is over, with the financial community betting the recovery will be quickly than the industry expects.

On Friday, Societe Generale raised its 2015 average price forecast for Brent by $4.33 to $59.54 a barrel and for US crude by $4.28 to $53.62.

Some analysts warn that recent price gains could encourage more US shale oil production.

OPEC crude production, meanwhile, outstrips demand by nearly 2 million barrels per day.

Some oil majors are considering further spending cuts to deal with an extended period of low prices.

"The hard facts are rather speaking for low prices," said Eugen Weinberg at Commerzbank.