RTRS:Oil heads for weekly gain as central banks calm markets
* November Brent crude heads for 1.7 percent weekly gain
* Oil fundamentals support, Europe crisis weighs -risk manger
* Coming Up: US Reuters/UMich sentiment index Sep; 1355 GMT (Updates prices)
By Alejandro Barbajosa
SINGAPORE, Sept 16 (Reuters) - Oil was headed for a weekly gain on Friday after central banks launched coordinated action to boost European bank funding, easing concern about falling oil demand from industrialised consumers.
Brent crude LCOc1 gained 50 cents to $112.80 by 0638 GMT, with the November contract up 1.7 percent this week. U.S. crude CLc1 shed 1 cent to $89.39, up 2.7 percent this week.
U.S. Treasury Secretary Timothy Geithner holds talks with European finance ministers on the possibility of leveraging the euro zone's bailout fund to help resolve the debt crisis.
Industrial output in top oil consumer the United States edged higher in August and consumer prices rose more than expected, reinforcing expectations the Federal Reserve would offer only modest stimulus measures.
"Fundamentals don't look too bad for oil, it's just that the macroeconomy has been keeping the market down," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
"We are still nowhere near out of the woods. They are just barely keeping the economy from falling off a cliff, but there is no structural solution to the European sovereign debt problem."
Major central banks around the world will cooperate to offer three-month U.S. dollar loans to commercial banks in order to prevent money markets from freezing up in the wake of Europe's debt crisis.
European shares were set for a stronger open on Friday and the euro steadied as investors hoped for a big policy move from European finance ministers to combat the region's growing debt crisis.
COORDINATED ACTION
Geithner will hold talks with EU ministers in Poland on Friday and will propose that the European Financial Stability Fund, a 440 billion euro fund set up in May 2010, be used in a way similar to an emergency loan fund created by the U.S. Treasury and the Federal Reserve in 2008 to thaw frozen credit markets, sources said.
Oil prices have also been under pressure from a deteriorating macroeconomic outlook.
New claims for U.S. jobless aid rose unexpectedly last week and factory activity along much of the Eastern seaboard contracted early this month, bolstering the case for more action to support the struggling economy.
The economic weakness is now being reflected in U.S. oil demand readings. The nation's total fuel consumption over the past four weeks fell 0.9 percent from a year earlier, while gasoline use over the summer declined to an eight-year low, according to the Energy Information Administration.
The International Energy Agency said on Thursday it was formally ending its release of oil from emergency reserves to help cover a shortfall caused by the loss of Libyan output, deeming the move successful.
Shipments of Forties crude oil are being further delayed due to production shortfalls, trade sources said on Thursday, disrupting more supply of the North Sea crude which usually sets the global Brent benchmark. [ID:nL5E7KF1KM
The premium of front-month European benchmark Brent over U.S. crude marker West Texas Intermediate shrank to below $24 a barrel on Friday from more than $26 a day earlier, as the October contract went off the board. It reached a record above $27 on Sept. 6. CL-LCO1=R (Editing by Clarence Fernandez)
