World oil prices steadied on Friday as traders digested better-than-expected non-farm payrolls data in the United States, but eyed ongoing uncertainty over the looming "fiscal cliff," dealers said.

Brent North Sea crude for January fell by ten cents to $US106.93 per barrel in late afternoon deals in London.

New York's main contract, light sweet crude for delivery in January added just one cent to $US86.27 a barrel.

The oil market had spiked higher immediately after the non-farm payrolls numbers but fell flat ahead of the weekend.

"Crude oil swung wildly into the positive territory after a much stronger-than-expected jobs report," said analyst Fawad Razaqzada at trading group GFT Markets.

"Some 146,000 net jobs were created in November which, together with another fall in the labour force participation number, helped to bring the unemployment rate down to 7.7 per cent from 7.9 per cent previously."

"However October's number was revised lower and that took some gloss off of an otherwise robust jobs report."

The data unexpectedly showed no real effect from Hurricane Sandy, which shut down much of the northeast economy around New York for days at the beginning of November.

Meanwhile, the University of Michigan consumer sentiment index declined to 74.5 from November's 82.7, which had been the best level in five years.

The data is crucial for the oil market because the United States is the world's largest crude consuming nation.

Ahead of the data, market sentiment was also dampened somewhat after Germany's Bundesbank warned that the eurozone powerhouse nation could sink into recession early next year, but was well placed to rebound strongly.

The German central bank, in its latest updated twice-yearly forecasts, said there were "indications that economic activity may actually fall in the final quarter of 2012 and the first quarter of 2013."

Recession is technically defined as two consecutive quarters of negative growth and many of Germany's eurozone neighbours have been pushed into recession, in some cases deep, by the region's long-running debt crisis.

The oil market had fallen heavily along with the euro on Thursday after the European Central Bank forecast that the eurozone would continue to contract next year and only return to growth in 2014.

In its regular quarterly staff economic projections, the ECB forecast that the euro area economy will shrink by 0.5 per cent in 2012 and another 0.3 per cent in 2013, instead of growing by 0.5 per cent next year as previously estimated.

The Frankfurt-based central bank also opted not to cut its benchmark interest rate, but ECB chief Mario Draghi left the door open for one in the future.

Meanwhile this week, the lack of a breakthrough over the fiscal cliff in Washington has kept a cloud over the oil market.

Congress and the White House have until the end of the month to come up with new legislation to avert the harsh spending cuts and tax hikes programmed for January under the fiscal cliff package.

Investors remain fearful that the automatic measures could push the world's biggest economy into another painful recession that would ravage global demand for energy.

AFP