Oil falls below $81 on mixed economic news

Oil prices fell below $81 on Friday after peaking above $83 following mixed economic reports that kept investor on edge about the outlook for improving energy demand.

Benchmark crude for April delivery dipped $1.16 to $80.95 a barrel on the New York Mercantile Exchange. Prices jumped as high as $83.16 earlier, after a surprise increase in February retail sales and a brighter outlook for world energy demand from the International Energy Agency. Crude has risen from $69.59 a barrel on Feb. 5 as economic data pointed to slow but steady U.S. economic growth. This past week oil prices have settled between $81.49 to just over $82.

The IEA, based in Paris, predicted in its monthly report that oil demand will average 86.6 million barrels a day this year, or 1.6 million barrels a day more than in 2009, up slightly from last month's forecast.

The Commerce Department said retail sales rose 0.3 percent in February. Analysts expected a decline of 0.2 percent. The increase was the biggest since November and provided some hope that the recovery from the Great Recession is picking up speed.

One energy analyst warned though that U.S. consumers are gripped by "timidity no doubt caused by the twin Damoclean swords of unemployment and foreclosure, still hanging over their heads.

"A return to pre-recession profligacy appears out of the question, for the moment," said Mike Fitzpatrick of MF global.

Many motorists paid more at the pump this week, as retail gasoline prices increased for the fifth straight day. The nationwide average rose 0.7 cents to $2.783 per gallon, according to AAA, Wright Express and Oil Price Information Service.

Gasoline prices have risen 14.2 cents in the last month and are now 85.2 cents higher than levels of a year ago.

In other Nymex trading in April contracts, heating oil fell 3.10 cents to $2.0840 a gallon, and gasoline lost 2.66 cents at $2.2454 a gallon. Natural gas gave up 1.4 cents at $4.422 per 1,000 cubic feet. Earlier it hit a 52-week low of $4.412 per 1,000 cubic feet.

In London, Brent crude fell $1.19 to $79.09 on the ICE futures exchange.