Oil futures ended at their highest level in a week Friday after the U.S. government reported a solid gain in jobs last month, suggesting improvement in the economy of the world's biggest oil consumer.
Light, sweet crude oil for April delivery settled 82 cents, or 0.8%, higher at $107.40 a barrel, the contract's highest finish since March 1.
Brent crude oil on ICE Futures Europe settled 54 cents, or 0.4%, higher at $125.98 a barrel.
The U.S. Labor Department's monthly nonfarm payrolls report said U.S. employers added 227,000 jobs in February, beating expectations for an increase of 213,000 jobs. The unemployment rate was unchanged at 8.3%.
Oil traders have long been taking cues from the monthly jobs report, the most-closely followed indicator of U.S. employment, because it offers insight into the economic health of the world's biggest crude-oil consumer. An improving economy is generally correlated with increased demand for oil and fuel products like gasoline.
The data also lent support to equities markets, with the Standard & Poor's 500 index recently gaining 0.3% to 1370. Oil prices have been closely tracking equities recently, which are seen as a barometer of the broader economy.
"Oil prices can be supported up here as long as the economy is still growing," said Carl Larry, president of Oil Outlooks and Opinions in New York. "If we're going to see strength in the economy and the equity markets, we're going to see strength in oil."
Oil futures spent the day swinging in a wide range before ending the day just modestly higher. The Nymex contract, the primary U.S. oil benchmark, spent much of the morning in negative territory, before shooting to as high as $108.20 a barrel in intraday trading.
Several traders were at a loss to explain the sudden rally, which coincided with a spike in the precious metals market. However, crude futures have been volatile in recent weeks amid worries over escalating tensions with Iran.
Jeffrey Grossman, president of BRG Brokerage in New York, said a premium of between $5 and $10 a barrel has been built into oil prices due to rising concerns over Iran.
"It is so susceptible to the upside it boggles the mind," Grossman said, referring to oil prices.
Iran and Western nations have been locked in a stand-off in recent months over Tehran's nuclear program. The U.S. and its allies worry the program is aimed at developing a nuclear weapon, and have stepped up sanctions against the country in recent months, including a European oil-import ban. Iran says its nuclear program is for peaceful purposes.
The situation has left market participants anxious about a supply disruption in the Strait of Hormuz, a major oil shipping channel, or a military conflict. Either outcome could send the price of oil skyrocketing, according to analysts.
Front-month April reformulated gasoline blendstock, or RBOB, settled 1.84 cents, or 0.6%, higher at $3.3324 a gallon. April heating oil settled 0.57 cent, or 0.2%, lower at $3.2638 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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