Oil prices record biggest weekly gain in three months

Crude oil prices capped the biggest weekly advance in three months, after U.S employers hired more workers than expected in December.

Brent for February settlement dropped 83 cents, or 0.7 per cent, to end at $111.31 a barrel on the London-based ICE Futures Europe exchange. The North Sea grade was $18.22 more than WTI, compared with $19.22 on Thursday.

West Texas Intermediate for February delivery settled at $93.09 a barrel on the New York Mercantile Exchange. The grade advanced 2.5 per cent this week, the most since Sept. 14.

Trading volume in WTI was 4.8 per cent above the 100-day average at 3:55 p.m. in New York, while Brent was 8.1 per cent higher.

Prices increased 17 cents after the US Labour Department said payrolls rose by 155,000 workers last month, exceeding the 152,000 forecast in a Bloomberg survey of economists. Futures were down for most of the day as the Energy Department reported gasoline and distillate fuel supplies jumped a combined 7.14 million barrels last week.

'The payroll number is stronger than expected and it gives the market a boost,' said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. 'The large build in gasoline and distillates put a lid on oil prices.'

The Labour Department also revised the November payroll increase to 161,000, more than initially estimated. The U.S. unemployment rate held at 7.8 per cent, matching the lowest level since December 2008.

'The payroll number is encouraging,' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

The economy created 1.84 million jobs for a second straight year, the Labor Department said on Friday. Annual revisions to the household survey showed the unemployment rate averaged 8.1 per cent in 2012, the least in four years.

Equities advanced following the jobs report, with the Standard & Poor's 500 Index (SPX) poised for its biggest weekly rally in 13 months.

Oil settled at a three-month high on January 2 after U.S lawmakers passed a bill on January 1 to undo automatic tax increases and spending cuts that had threatened growth in the world's biggest oil-consuming country. President Barack Obama signed it into law on January 2.

Futures fell in intraday trading on Friday after the Energy Department said gasoline stocks rose 2.57 million barrels to 225.7 million in the week ended December 28, the most since March. It exceeded the median forecast for a 2.2 million-barrel increase in a Bloomberg survey of 10 analysts.

Distillate fuels, including diesel and heating oil, jumped 4.57 million barrels to 124 million, more than triple the forecast 1.25 million-barrel gain.

Gasoline for February delivery dropped 1.2 per cent to settle at $2.7643 a gallon on the Nymex. Heating oil for February delivery fell 0.2 per cent to $3.0177 a gallon.

Crude stockpiles dropped 11.1 million barrels to 359.9 million. The inventories were forecast to decline by 1 million. Supplies at Cushing, Oklahoma, the delivery point for New York futures, increased to a record 49.8 million barrels.

Oil stockpiles have decreased during December for the past six years because of inventory shifts for tax and accounting purposes. Companies in Gulf Coast states minimize supplies at the end of the year to reduce local taxes.

'Refineries were trying to lower their crude inventories for tax purposes at the end of year,' said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. 'So I don't think the drop is a really bullish sign, especially when you see product stocks build.'

The Energy Department released its weekly report two days later than usual because of the holiday on New Year's Day.

WTI slid in 2012 as the U.S shale boom deepened a glut at Cushing, Oklahoma, America's biggest storage hub and the delivery point for the New York contract. That left it at an average $17.48 a barrel below Brent last year, compared with a premium of about 95 cents in the 10 years through 2010.

Electronic trading volume on the Nymex was 462,333 contracts as of 3:55 p.m. Volume totaled 434,724 contracts on Thursday, 11 per cent below the three-month average. Open interest was 1.48 million.