Oil prices rose on Friday, with Brent nearing $118, as investors anticipated U.S. payrolls data later in the session will confirm the improving economic outlook of the world's largest oil importer.
Fighting in Libya, where Muammar Gaddafi's forces appear to have regained the upper hand, also supported crude prices as the prospect of a drawn-out conflict reduced expectations of lost Libyan oil returning to the market in the near future.
Brent futures for May delivery rose 19 cents to $117.55 by 4:01 a.m. ET, close to the highest level in almost four weeks. U.S. crude futures were up 35 cents to $107.07 after earlier hitting $107.65, an intraday peak last touched in September 2008.
In the past two days, the financial markets have been the main driver of higher crude oil prices, but in the back of every investor's mind there is the unrest in the Middle East and that is supporting the market, said ANZ Bank analysts Serene Lim.
Oil prices gained traction in the second half of this week after a report on Thursday showed U.S. jobless claims fell last week and data pointed to improving employment in the Midwest.
A Reuters poll suggested the U.S. non-farm payrolls data for March, due at 1230 GMT, would show a second straight month of solid job growth, adding 190,000 jobs. A rise would imply the labor market has turned a corner after lagging the broader economic recovery.
While improving economic performance is lifting industrial demand for energy in the U.S., high prices at the pump are damaging consumer confidence and capping gasoline demand.
LIBYA, MIDDLE EAST TURMOIL
Libyan rebels cheered the defection of the foreign minister on Thursday as a sign Gaddafi's rule was crumbling, but U.S. officials warned he was far from beaten and made clear they feared entanglement in another war.
But analysts warned it was doubtful Libyan crude would reach world markets on a sustained basis because of the risk of loading cargoes and said recent advances by government troops were bullish for oil prices.
This means the likelihood of a return to some normalcy in terms of oil production is pushed back somewhat further, as investors, instead, start to discount the more troubling scenario of a bloody quagmire setting in, meaning that 1.1 million barrels a day of oil exports could be sidelined indefinitely, said MF Global analyst Edward Meir in a note.
Bahrain has stepped up arrests of cyber activists and Shi'ites and investors will also keep a close eye on events in Syria and Yemen. The conclusion of Friday prayers is a favored time for protests in the region.
Reuters technical analysis suggests Brent will continue to rise toward $119.79 as a short-term uptrend pointing to $123.46 per barrel has been established, although there is a minor resistance zone between $118.37 and $118.50.
(Additional reporting by Alejandro Barbajosa, editing by William Hardy)