By Shadia Nasralla and Noah Browning

LONDON (Reuters) -Oil futures rose on Friday on course for a fourth weekly gain boosted by supply constraints and a weaker dollar and despite sources saying China is set to release crude reserves around the Lunar New Year.

Brent crude futures rose 71 cents, or 0.8%, to near a two-and-a-half month high of $85.18 a barrel at 1430 GMT. U.S. West Texas Intermediate crude gained 57 cents, or 0.7%, to $82.69.

Crude prices turned positive as the dollar headed towards what could be its largest weekly fall in more than a year. A weaker dollar makes commodities more affordable for holders of other currencies. [FRX/]

Several banks have forecast oil prices of $100 a barrel this year, with demand expected to outstrip supply, not least as capacity constraints among OPEC+ countries come into focus.

“When you consider that OPEC+ is still nowhere near pumping to its overall quota, this narrowing cushion could turn out to be the most bullish factor for oil prices over the coming months,” said PVM analyst Stephen Brennock.

However, sources told Reuters that China plans to release oil reserves around the Lunar New Year holidays between Jan. 31 and Feb. 6 as part of a plan coordinated by the United States with other major consumers to reduce global prices.

The U.S. Energy Department on Thursday said it had sold 18 million barrels of strategic crude oil.

China has also posted its first annual decline in crude oil imports in two decades, though traders expect imports to recover this year.

There were also concerns about fuel demand in the world’s second-biggest oil consumer as the Omicron coronavirus variant spread to the cities of Dalian and Tianjin.

Many cities, including Beijing, have urged people not to travel during the Lunar New Year holiday, which could cool demand.

(Reporting by Shadia NasrallaAdditional reporting by Florence TanEditing by David Goodman, Jason Neely, Kirsten Donovan)