SINGAPORE, (Reuters) – Oil prices were up near $104 on Friday, consolidating after a heavy sell off earlier in the week, supported by a weaker dollar and concern over U.S. sanctions against Iran, but the eurozone debt crisis continued to weigh.

Brent crude, which rolled over to February as the prompt month, was up 53 cents to $104.13 a barrel by 0924 GMT. U.S. crude rose 17 cents to $94.04 a barrel, after falling $1.08 to settle at $93.87 on Thursday.

“Support is still coming from the usual suspects, the weaker U.S. dollar and some strength from the equity markets,” said Eugen Weinberg, an analyst at Commerzbank in Frankfurt.

“Also, after the sell off over the last couple of days it is not surprising that prices are stabilizing. We might see some bargain hunting and possibly even a technical rebound after the strong price reaction on Wednesday.”

Brent is on course to decline 4.3 percent this week, its biggest drop since the week ending November 20, while the U.S. benchmark is set to slip 5.5 percent, its biggest fall since the week ending September 25.

Oil prices have gyrated wildly this week, with Brent shooting up to $111.10 on Tuesday after worries about restrictions to a key shipping lane.

But prices plunged more than 4 percent on Wednesday in a broad commodities sell-off triggered by concerns over Europe.

Helen Henton, head of commodities research at Standard Chartered, said she remained bearish on oil going into the first quarter of 2012, citing a slowdown in the global economy.

“Brent has stayed quite surprisingly high over the last month given that we have had dollar strength,” she said. “The downside risks for Europe are quite significant but it will take some trigger to move lower.”

Weinberg echoed that the market was watching for any downgrades in the credit ratings of European states.

Italy’s government faces a confidence vote in parliament on Friday, a move to speed the approval of a 33-billion euro ($43 billion) austerity package intended to restore market confidence in the eurozone’s third largest economy.

Reflecting the worsening financial conditions, on Thursday Fitch Ratings downgraded Goldman Sachs, Deutsche Bank and five other large banks in Europe and the United States, citing “increased challenges” in the financial markets.

SANCTIONS

South Korea on Friday imposed new sanctions on Iran, banning fresh investment in its oil and gas sectors and blacklisting additional Iranian firms and personnel, although its moves appeared to fall short of demands from Washington.

The U.S. House of Representatives passed legislation on Wednesday that would expand sanctions on Iran, cracking down on a wider range of energy issues and closing some loopholes in existing energy and financial sanctions.

“The geopolitical tensions surrounding Iran are … keeping prices supported at current levels, despite growing worries about the economy,” said Ben Le Brun, market analyst at OptionsXpress. “China can run but can’t hide from what’s going on in Europe. The fall-out will hurt everybody.”

But Henton said that unless there was an embargo imposed by every country Iranian crude would get into the market somewhere.

“It is more likely to affect crude spreads between the different benchmarks rather than the overall level of oil prices globally, once the initial shock is gone,” she said.

“Nothing will be in place until the end of Q1 and if we see the economy deteriorate in the meantime that will probably outweigh the impact.”

The dollar index was down 0.17 percent at 0922 GMT after rising for most of the week. A weaker dollar is generally supportive for commodities priced in dollars as it makes them more affordable for those using other currencies.

With traders and investors now squaring their books away for the year end, volumes are lighter than usual, which could lead to more volatility, analysts warned.

“Volumes are likely to be decreasing slowly as we get nearer to Christmas,” said Weinberg. “During this period, because of the lower volumes, the market is more susceptible to moves that aren’t fundamentally sound – we may see some further volatility.”