OIL futures soared yesterday after Turkish airstrikes on Kurdish rebel bases in Iraq injected some supply concerns into the market and the Labor Department's employment report gave investors reason to be optimistic about the U.S. economy.
Light, sweet crude for June delivery rose US$3.80 to settle at US$116.32 a barrel on the New York Mercantile Exchange.
Turkish warplanes bombed Kurdish rebel bases inside Iraq for three hours overnight, a rebel spokesman said yesterday. When conflict breaks out in the Middle East, investors often buy on concerns that supplies will be disrupted.
Some investors were also buying crude on a view that the economy is improving, analysts said. The Labor Department said employers cut far fewer jobs in April than expected.
"If the jobs (situation) isn't as bad, maybe we'd see a snap back in demand," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
For a change, investors shrugged off the dollar, which rose on a theory that the employment data means the Federal Reserve is less likely to cut interest rates further this year; falling rates tend to weaken the dollar.
A rising dollar undercuts the appeal of commodities such as oil as a hedge against inflation, and makes oil more expensive to investors overseas. The rising greenback helped pull oil prices back to nearly US$110 a barrel on Thursday. Oil's climb to almost US$120 on Monday from about US$64 a year ago was largely due to a protracted decline by the dollar, analysts say.
However, oil's connection to the dollar can be broken when other factors predominate, as they did Friday.
"It's not a perfect relationship, and on any given day, oil will choose to go its own way," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.
Still, analysts think the market's decision to shrug off Friday's stronger dollar will be short lived, particularly if the Fed holds interest rates steady and the dollar continues to gain.
"It will be difficult to sustain (oil price) rallies in the face of any further strength in the dollar," Ritterbusch said.
In other Nymex trading Friday, June gasoline futures rose 8.82 cents to settle at US$2.9664 a gallon, and June heating oil futures rose 10.10 cents to settle at US$3.2187 a gallon. June natural gas futures rose 21.6 cents to settle at US$10.777 per 1,000 cubic feet.
In London, June Brent crude futures gained US$4.06 to settle at US$114.56 a barrel on the ICE Futures exchange.
writer C. Onur Ant in Istanbul, Turkey, contributed to this report.