Oil Friday closed up 65 cents to $98.85 -- shaking off earlier profit-taking -- after word that Turkey had launched a ground incursion across the border into northern Iraq.

It was the highest three-day print close for oil ever. Oil gained more than $3 this week and closed above $100 twice. (Oil hit an all-time high, in inflation-adjusted terms, of $102.80 per barrel in April 1980.)

Oil: bull, bear battle

Independent energy trader Jim Dietz told BloggingStocks Friday the market remains volatile and conflicted.

"What we have now is a battle royale. Oil inventories have risen for five weeks and gasoline demand is slowing. Gasoline demand is up less than 1% year-over-year, and that suggests a major drop in oil's price is ahead. Bigtime," Dietz said. "But the bulls aren't giving up. They point to Venezuela's threats to cut-off oil to the U.S., the civil strife in Nigeria that never seems to go away, OPEC's possible March cut, and now Turkey crossing the Iraq border, as bullish signs, and they have a point. So it's a pretty conflicted market right now."
Volatile market

Eventually, fundamental data points will add up in either direction, to resolve oil's status for the next quarter or two, Dietz said. Until then "it's definitely not a market to trade." Dietz added that he's currently flat, or has no open positions, but noted that he lost money on the two days he traded this week.

The other major energy commodities also rose Friday. Heating oil gained about 3 cents to $2.77 per gallon, unleaded gasoline climbed about 2 cents to $2.54, and natural gas rose about 30 cents to $9.19 per million BTUs.

Dietz said if inventory fundamentals and current demand were the only factors in the market, oil would trade around $75-80 per barrel, and probably lower. However, inventory fundamentals do not tell the whole story in the oil market, and they rarely do, he said. Venezuela President Hugo Chavez's threats to cut off oil to the U.S. is adding "at least $5 to the price of oil." Further, while traders do not expect Turkey's incursion into northern Iraq to affect oil production, the region supplies about 500,000 barrel per day via Mediterranean Sea ports, a substantial amount of crude in an oil-hungry world, he said.

"This market gets jittery over a 50,000 barrel drop anywhere, so when tanks move anywhere near an oilfield, that's enough to get traders in buy mode," Dietz said. "This market remains very edgy, with a new thesis every few days. No question, a volatile period."

Looking ahead to next week, Dietz noted that the release of the preliminary Q4 U.S. GDP statistic and the weekly oil inventory report are likely to clarify the oil market supply/demand picture, "barring the appearance of the unexpected, which, these days in the oil market, seems to occur perpetually."