Oil slips below $98 after climbing to 2014 high

The price of oil slipped below $98 a barrel on Friday, backing off the 2014 peak it hit in the previous session on signs of stronger recoveries in the U.S. and Japan.

By early afternoon in Europe, benchmark U.S. crude for March delivery was down 43 cents to $97.80 in electronic trading on the New York Mercantile Exchange. On Thursday, the Nymex contract gained 87 cents to settle at $98.23, the highest close of the year.

Japan reported that factory output rose in December and the consumer price index rose 0.4 percent in 2013, the first increase in five years, further evidence the world's third-largest economy is gaining strength.

News the U.S. economy grew at a 3.2 percent annualized rate in the last quarter thanks to stronger consumer spending has reaffirmed expectations that 2014 will be the best year since the recession ended 4 1/2 years ago.

A stronger dollar also weighed on oil prices, making commodities like crude priced in dollars more expensive for traders using other currencies. The euro was down to $1.3531 on Friday from 1.3552 late Thursday in New York.

Brent crude, used to set prices for international varieties of crude, was down 70 cents to $107.25 a barrel on the ICE Futures exchange in London.

The spread between the Nymex and Brent contracts has dropped below $10 for the first time since early November.

"For as long as the cold snap continues in the U.S., the trend toward a falling price gap is likely to continue," said analysts at Commerzbank in Frankfurt in a note to clients.

Extremely cold weather in the U.S. has pushed up demand for heating oil this winter, tightening supplies of distillate fuels, including heating oil, to about a fifth below five-year averages. Heating oil futures have gained 10 cents since Jan. 14.

Forecasts for milder temperatures, however, have pushed natural gas prices sharply lower after they rose earlier this week to levels last seen four years back.

In other energy futures trading in New York:

- Wholesale gasoline retreated 0.39 cent to $2.6704 a gallon.

- Heating oil futures were down 0.31 cent to $3.0244 a gallon.

- Natural gas futures lost 14 cents to $4.871 per 1,000 cubic feet.