Oil steadied on Friday with U.S. light crude below $99 per barrel, as the dollar rose and investors worried about the outlook for global economic growth.

Oil futures have consolidated this week after a very sharp sell-off at the beginning of May and investors have begun to look ahead to a meeting of oil producer group OPEC next month which will reassess supply policy.

The West's energy watchdog, the International Energy Agency (IEA), on Thursday urged OPEC to increase oil production to protect the global economy and appeared to suggest its members could release emergency stockpiles if OPEC failed to act.

But analysts say the Organization of the Petroleum Exporting Countries is extremely unlikely to raise output and its meeting next month will be attended by Iranian President Mahmoud Ahmadinejad, a price hawk who looks set to reinforce opposition to any move toward higher output.

U.S. light crude oil futures for June, which expire later on Friday, were trading around $98.80 per barrel, up 36 cents by 1230 GMT, after hitting an intra-day high of $99.60.

Brent crude for July rose 6 cents to $111.48.

The U.S. crude front contract has traded in a relatively narrow range between $95.02 and $100.99 this week after falling from a peak of $114.83 on May 2. Brent has swung between $108.07 and $114.00 this week.

The consolidation phase comes after both crude grades lost between $15 and $20 in the prior two weeks, a correction some traders and analysts said was overdone.

Oil has been much steadier and has been driven more by outside factors such as euro/dollar and stock markets than by supply/demand fundamentals, said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.

The market is beginning to look ahead to OPEC now and to see how it will respond to recent events, he added.

OPEC

National Australia Bank commodities economist Ben Westmore said OPEC was unlikely to change its output targets at its meeting in Vienna on June 8.

The relative abundance of crude stocks on the international market would be justification enough for (OPEC) to leave production quotas unchanged, he said. All things considered, no change to OPEC production quotas appears to be the most likely outcome from the upcoming discussions.

Fritsch at Commerzbank agreed: The presence of the Iranian president at the OPEC meeting makes an output hike less likely.

Governments from the United States to China are concerned the surge in oil prices this year may derail the nascent global economic recovery as high costs accelerate inflation, paring consumers' ability to spend, resulting in a demand slowdown.

Demand for oil in countries such as China has been fed by rapid economic growth. The nation's implied oil demand in April rose 8.8 percent from a year earlier to the third highest on record on a daily basis, according to Reuters calculations.

The country's central bank governor, Zhou Xiaochuan, said on Friday the government was trying to find a balance between controlling inflation and supporting growth.

Oil prices have surged this year in part due to concerns that unrest will spread from Libya and Syria to other countries that are major oil exporters, just at a time when demand from emerging nations such as China and India continues to rise.

The risk premium... is expected to persist through 2011 with an orderly near-term resolution of the conflict in Libya difficult to envisage, Westmore said.

Investors awaited data from the New York-based Economic Cycle Research Institute (ECRI), which was due to publish its weekly index, a measure of future U.S. growth, at 1430 GMT.

(Additional reporting by Manash Goswami in Singapore; editing by James Jukwey)