Oil prices rose Monday as prospects for further cuts in U.S. interest rates seemed more likely after poor U.S. jobs data at the end of last week.
Light, sweet crude for May delivery rose 80 cents to $107.03 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. On Friday, the contract rose $2.40 to settle at $106.23 a barrel.
In London, Brent crude futures rose 56 cents to $105.46 a barrel on the ICE Futures exchange.
The U.S. Labor Department said Friday that employers cut payrolls by 80,000 jobs last month, much more than analysts had expected. The news that the U.S. unemployment rate rose to 5.1 percent is consistent with forecasts that the U.S. is experiencing a sharp pullback in economic growth in the first half of the year.
"The dollar fell because investors figured that the U.S. Federal Reserve would cut interest rates even further to help bolster the economy," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
The Fed has cut its key rates several times since the middle of last year in an effort to shore up the U.S. economy against fallout from the subprime housing loan crisis. And each reduction has pulled investors to oil, gold and other hard commodities as a hedge against inflation and a weakening currency.
"The falling dollar has been one of the key factors supporting oil prices in the past weeks," Shum said.
While oil demand in the world's largest energy consumer has slowed along with the U.S. economy, oil prices have not.
Many analysts believe that's partly because weak economic data has hastened the decline of the dollar, whose weakness sustains the purchasing power of oil consumers using other currencies, and prods oil exporters to raise prices for the dollar-denominated commodity.
"The weakening fundamentals exert a lid on how high oil pricing can go, but the weak dollar continues to prop up oil pricing," Shum said. "We have this tug of war going on. ... I think that fundamentals will eventually prevail and pull back oil prices as you can defy the gravity of fundamentals only for so long."
Figures released last week by the U.S. Energy Information Administration supported concerns that demand growth in the United States for oil and its products continued to weaken.
For example, negative demand growth for diesel "could be an indication of less trucking activity stateside, which could be the result of an economic slowdown," said a report by JBC Energy in Vienna, Austria, which forecast a 1 percent drop in U.S. demand this year.
In other Nymex prices, heating oil futures rose 2.97 cents to $3.0218 a gallon (3.8 liters) while gasoline futures added 1.47 cents to $2.7714 a gallon.
Natural gas futures rose 9.9 cents to $9.421 per 1,000 cubic feet.
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Associated Press writer Gillian Wong in Singapore contributed to this report.
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