* Bernanke signals more easing to avoid deflation
* Dollar flips higher versus euro, currency basket
* U.S. inflation slows, consumer sentiment dips
* Coming up: September U.S. industrial output Monday
(Updates with settlement prices, market activity)
By Gene Ramos
NEW YORK, Oct 15 (Reuters) - Oil prices fell nearly 2
percent in light, volatile trading on Friday, posting their
first weekly loss in four weeks, as options expired and the
dollar rose, sparking profit-taking ahead of the weekend.
Oil prices rose early in the session after U.S. Federal
Reserve Chairman Ben Bernanke signaled that the central bank
would likely pump more money into the sagging economy.
[]
But prices weakened later on the view that any such
quantitative easing was already priced in the market and as the
dollar rose on profit-taking, with traders saying its recent
decline was overdone. [] A stronger dollar makes
commodities like oil more expensive for buyers holding other
currencies.
At the same time, crude oil options trading plays kicked
in, pressuring prices.
"The oil slide started as the dollar continued to rise.
But, as November crude penetrates various strike prices, it
causes traders to sell futures to protect against expiring
option exposure," said Tom Bentz, broker at BNP Paribas
Commodities Futures Inc in New York.
On the New York Mercantile Exchange, crude for November
delivery <CLX0> settled down $1.44, or 1.74 percent, at $81.25
a barrel, after trading from $80.75 to $83.33. By 3:45 p.m. EDT
(1945 GMT) volume was around 661,000 lots.
For the week, front-month NYMEX crude fell $1.41, or 1.71
percent.
At the start of the day, put options -- contracts that
grant the right to sell at a specific price by a certain date
-- were concentrated on the $82, $81 and $80 levels.
"The market was attempting to push up to $85, and we got to
near $84.50 earlier in the week, and (then) the market turned
back down," said Gene McGillian, an analyst at Tradition Energy
in Stamford, Connecticut.
He added that, as the dollar gained on Friday, concerns
about oil fundamentals began to weigh on the market.
"Because of our poor underlying fundamentals, the longs in
the oil market are very kind of skittish about the direction of
the market, he added."
In London, ICE December Brent crude <LCOc1> fell $1.75, or
2.08 percent, to end at $82.45, after sliding to a low of
$81.95. For the week, front-month Brent crude fell $1.58, or
1.9 percent, its first weekly loss in eight weeks.
QUANTITATIVE EASING CONCERNS
Oil investors also raised questions about the size and the
timing of the widely expected purchases of government debt by
the central bank in a second round of quantitative easing
measures. The unease prompted profit-taking.
"There were no clear-cut signals from the speech of Fed
chief Ben Bernanke on how large the amount of quantitative
easing will be, and that has the oil market concerned. That has
led to some profit-taking in this volatile market," Tradition
Energy's McGillian said.
Economic reports kept pressure on the Fed to act soon to
lessen the risk of a downward price spiral.
U.S. inflation unexpectedly slowed in September, despite a
pick-up in retail sales, the government said. A survey showed
U.S. consumer sentiment unexpectedly dipped in early October to
its weakest level since July, with buying plans declining.
[]
OPEC's secretary general said oil prices of $75 to $85 a
barrel would not hold back the global economy. Some members of
the Organization of the Petroleum Exporting Countries have
called for higher prices to compensate for a weak U.S. dollar.
OPEC decided on Thursday to leave its oil output policy
unchanged, as it has done since agreeing to a record output cut
in December 2008.
(Additional reporting by Robert Gibbons and Joe Brock in New
York; Editing by Walter Bagley)
