* Front-month Brent heads for weekly drop of more than 4 pct
* Correlation between oil prices and euro remains high
(Updates prices, adds quotes, previously SINGAPORE)
By Zaida Espana
LONDON, June 17 (Reuters) - Crude oil futures fell by more than $2 on Friday amid growing risk aversion because of Greece's ongoing debt crisis, sending prices down by more than 4 percent this week in the biggest drop since early May.
The euro slid close to three-week lows with markets still unconvinced that the highly-indebted European country could avoid a default even after appearing to secure a round of near-term funding. [MKTS/GLOB]
Brent crude for August
"Greece will weigh into prices next week, it will be an underlying concern for the weeks to come. It's like watching Lehman in 2008... it's a problem but we don't have the solution," Olivier Jakob from Petromatrix said.
Analysts were worried about the impact of the ongoing euro zone debt crisis, which dragged equity markets lower and forced Spain to pay a premium in its latest debt auction. [ID:nLDE75F0U9]
"Everyone is fearful about the euro financial crisis, especially in Greece," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage.
"We have seen some good and some bad data. We hope the euro will stabilize because it's very much correlated with crude."
U.S. data over the week showed the economy of the world's top oil consumer continued to sputter in the second quarter. It also offered evidence the recovery was on course to regain momentum as the year progresses. [ID:nN16172420]
U.S. Mid-Atlantic factory activity contracted in June to a near two-year low, overshadowing better-than-expected readings on the nation's labor and housing markets.
"Demand is not so bad and is steadily increasing in the developing countries and supply will tighten in the second half of the year," Hasegawa said.
The International Energy Agency on Thursday raised the pressure on OPEC to increase output by forecasting a steep rise in oil demand later this year and predicting the strain on supply would last over the medium term. [ID:nLDE75F0JR]
The Paris-based IEA raised its assessment of how much OPEC oil would be needed this year by 400,000 barrels per day (bpd) to 30.1 million bpd in a monthly report.
BRENT VS WTI
Brent's premium to U.S. crude WTI was near $19 a barrel on Friday, after hitting a record $23.34 two days earlier, when the July contract expired.
"While WTI distortions have been a key market driver in 2010, there has been little in the way of new fundamental catalysts to warrant the ballooning out of that spread to such extreme values," Barclays Capital analysts headed by Paul Horsnell said.
"In an oversupplied U.S. market, the need to import Brent is all but gone, and, hence, the WTI-Brent spread is rendered meaningless."
Oil prices will stay above $100 a barrel in the next year as supply worries outweigh concerns about flagging global economic growth, a Reuters survey of oil industry officials, executives and traders showed. [ID:nLDE75F11F]
Eight of 20 participants in the Reuters Energy and Climate Summit said they saw oil trading between $110 and $130 a barrel in June 2012, eight saw prices between $90 and $100 and three saw prices above $130. Only one respondent saw prices between $70-$90 per barrel.
OPEC & IEA
A failure by the Organization of Petroleum Exporting Countries (OPEC) to boost output last week, despite calls from the West to help protect economic growth, has fueled debate over whether OPEC and leading member Saudi Arabia have enough spare capacity if demand rises and prices spike. [ID:nN13138830]
Saudi Arabia is expected to raise output towards 10 million barrels a day (bpd) this month, sources said earlier this week, up from 8.86 million bpd in May. [ID:nLDE75D08W]
The IEA stands ready to release strategic reserves of crude oil to ensure adequate supply and support the global economy, Executive Director Nobuo Tanaka said on Thursday. [ID:nLDE75F0SB]
"While there is a growing perception that near term oil supplies will be adequate either through an OPEC or IEA response, we reiterate our concern that such confidence could prove ephemeral, and the arrival of adequate supplies is far from guaranteed," said J.P. Morgan analysts led by Lawrence Eagles.
The number of crude oil tankers booked from the Middle East has surged 15 percent to a multi-year high this month due to an increase in Saudi Arabian exports, shipbrokers said on Friday. [ID:nL3E7HH088] (Additional reporting by Alejandro Barbajosa in Singapore; editing by )