* Early rally during session on supply disruptions, Wall St
gains
* Brent up 6 pct on week, U.S. posts 11 pct weekly gain
* Traders see more upward momentum for oil in near-term
(New throughout, updates market activity to settlement)
By Barani Krishnan
NEW YORK, Feb 26 (Reuters) - Oil prices fell on Friday as
investors cashed out big weekly profits after a rally driven by
disruptions to crude supplies and Wall Street's gains from U.S.
economic data.
Prices turned negative soon after the release of weekly U.S.
oil rig data by industry firm Baker Hughes that showed a 10th
weekly drop in the rig count. The data was positive to oil, but
traders and investors chose to lock in profits.
"I think a good part of the selling was due to cashing out
of winning positions people had established earlier in the
week," said David Thompson, executive vice-president at
Powerhouse, a commodities-focused broker in Washington.
Brent crude LCOc1 settled down 19 cents at $35.10. It hit
a high of $37 earlier, a peak since Jan. 5.
U.S. crude CLc1 settled down 29 cents at $32.78 a barrel,
after gaining almost $1.70 earlier.
For the week, Brent was up more than 6 percent after rising
for four days. U.S. crude rose 11 percent on the week, its
steepest weekly rise since August.
Oil was up from the start of the week after data showing a
slide in shale crude output and strong gasoline demand in the
United States. Also bolstering prices was a meeting scheduled
for mid-March by at least four major oil producers, including
Saudi Arabia, to discuss a production freeze at January's highs.
On Friday, the market initially surged on news that pipeline
outages in Iraq and Nigeria will remove more than 800,000
barrels of crude per day from global supply for at least two
weeks. The disruptions should offset recent increases to supply
from Iran, analysts said.
Oil was later boosted by the U.S. stockmarket as an upward
revision to the country's fourth-quarter economic growth drove
Wall Street's key S&P index near 2-month highs. A raft of other
U.S. economic data also boosted equity prices, which have moved
in tandem with oil for weeks. .N
Some analysts and traders expect crude prices to continue to
rise in the near-term, or at least remain volatile.
Hans Van Cleef, senior energy economist in Amsterdam for ABN
Amro, said Brent's break above the $36.25 technical resistance
indicated "more short covering in the coming days".
Jeffrey Grossman, dealer at New York's BRG Brokerage,
expects to see U.S. crude at over $40 by March-end.
Investment bank Jefferies called current prices
unsustainable, saying output declines among key non-OPEC
producers will likely spark a recovery by second half 2016.