Oil edges lower on strong dollar, European data

An earlier version of this story had the incorrect settlement for crude oil. The story has been corrected.

SAN FRANCISCO (MarketWatch) � Crude-oil futures inched higher Wednesday, supported by persistent fears of supply disruption and pessimism about the global oil supply outlook.

Crude oil for April delivery , the new front-month contract, gained 3 cents to settle at $106.28 a barrel on the New York Mercantile Exchange. The close extended oil�s gains for a fifth session and marked the highest settlement since May 4.

Gasoline, heating oil, and Brent crude also settled at multimonth highs.

The April crude contract settled Tuesday at $106.25 a barrel. The March contract, which expired on Tuesday, settled at $105.84 a barrel, rising 2.5% in the session on the fears of more supply disruptions from Iran and as traders cheered Greece�s second bailout. See report on Tuesday�s crude-oil moves..

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�After the euphoria (Tuesday) with the Greek deal ... we had some rather poor economic data both from Europe and China,� said Matt Smith, an analyst with Summit Energy in Kentucky.

Downbeat economic data from the euro zone and China weighed on oil prices on Wednesday. A gauge of business activity in the euro area unexpectedly showed a contraction in February, after expanding in January.

In China, the preliminary version of HSBC�s closely watched gauge of Chinese manufacturing rose in February but remained at levels that indicate modest contraction. See report on Chinese manufacturing data.

A gain for the U.S. dollar also helped send crude down, and as the dollar pared gains slightly oil futures prices rose.

The dollar index DXY , which compares the U.S. unit to a basket of six currencies, advanced to 79.197 from 79.023 in North America late Tuesday. A stronger U.S. currency tends to depress crude-oil prices, which are denominated in dollars.

Nonetheless, �broader market sentiment remains bullish,� said Tim Evans, a trader with Citigroup�s Citi Futures Perspective, in a note to clients.

Investors are �apparently convinced that none of the macroeconomic numbers are soft enough to hurt all that much and that Iran�s nuclear program remains a substantial bullish threat,� he said.

Analysts have estimated the concerns around a supply disruption in the Middle East are putting a premium between $10 and $20 a barrel on oil prices.

A visit to Iran by the International Atomic Energy Agency was �disappointing,� and no progress has been made, the head of an IAEA delegation told reporters in Vienna on Wednesday, according to media reports.

The delegation had arrived from Tehran after two days of talks with United Nations experts about Iran�s nuclear program, which the country insists is peaceful and Western powers view as a nuclear arms race. The delegation�s visit to a key military base in Iran was denied.

Meanwhile, Iran said it may resume oil exports to the U.K. and France if they sign long-term contracts and honor an oil debt to Italy�s Eni SpA E , according to a Dow Jones Newswires report quoting an Iranian oil official.

News that Iran would cut off oil sales to the U.K. and France are an example of the �rhetoric and posturing from Iran� creating havoc in the oil markets, Summit Energy�s Smith said. Iran hadn�t supplied any oil to Britain in the last six months, and had supplied minuscule amounts of oil to France, he said.

The worries surrounding Iran was enough to give Europe�s benchmark, the Brent oil blend, unequivocal support early on. Brent for April delivery �gained $1.24, or 1%, to trade at $122.90 a barrel on ICE Futures in London.

That was the highest settle for Brent since May 2.

Other energy futures tracked oil marginally higher, with gasoline also switching from early losses. March gasoline , which expires next week, rose 2 cents, or 0.6%, to $3.09 a gallon. That marked gasoline�s highest settlement since July 29.

March heating oil , which also expires next week, rose 3 cents, or 1%, to $3.27 a gallon. That was heating oil�s highest finish since April 8.

March natural gas �added 2 cents, or 0.7%, to $2.64 per million British thermal units.