U.S. crude oil futures rose nearly 1 percent on Thursday, as a weaker dollar offset worries that surging prices would erode demand.

With no clear end to fighting in Libya that has cut supplies from the OPEC nation and lifted oil prices to 32-month highs, the market focused on U.S. economic data and the dollar.

The dollar fell after U.S. data showed an unexpected rise in jobless claims and an increase in producer prices in March.

When the (producer prices) and the weekly job claims number came out, we saw a reversal in the dollar and we saw a corresponding (rise) in oil prices, said Stephen Schork, editor of the Schork Report, in Villanova, Pennsylvania.

Futures were also boosted by news that Sunoco Inc shut a gasoline-making unit at its 335,000-barrels-per-day Philadelphia refinery after a small fire.

On Wednesday, U.S. data showed gasoline stockpiles plunged 7 million barrels last week, the biggest weekly drop in more than 12 years, raising concerns about supplies ahead of the summer driving season.

U.S. crude for May delivery gained $1 to settle at $108.11 a barrel. Upward pressure came in part from options on the contract, in which concentrations of calls were at a level above current prices.

In London, ICE May Brent crude expired, settling at $122.36 a barrel, down 52 cents.

Brent's premium to U.S. crude narrowed to $14.25 from $15.77 at the close Wednesday.

U.S. crude volume hit 715,000 lots as of 4:25 p.m. EDT, 5.5 percent above the 30-day average, with less than an hour of the day's trading left. Brent crude volume was nearly 400,000 lots, 17 percent below the 30-day average.


First-time claims for U.S. unemployment benefits rose unexpectedly last week, raising questions about the health of a labor market recovery. Also, producer prices picked up pace in March as the disruption caused by Japan's earthquake began to be felt in the auto industry.

The dollar fell against a basket of currencies after the data. <.DXY>

The spike in jobless claims back over 400,000 hit the dollar, which once again is supporting energy and precious metal prices. It's a troubling data point from an area that we thought some progress was being made, said John Kilduff, a partner at Again Capital LLC in New York.

Libyan rebels begged for more NATO air strikes, saying they faced a massacre from government artillery barrages on the besieged city of Misrata. But NATO allies rebuffed French and British calls to contribute more to the air war in Libya.

Libyan rebels have said they are exporting a minimal amount of crude from fields, pumping about 100,000 barrels per day, far less than usual production of 1.6 million bpd.

Elsewhere, the oil market had little reaction to news that inflation in China accelerated faster than expected in March.

China's first-quarter GDP figures and March consumer price data are due Friday, and will be scrutinized for signs of out-of-control growth. That could prompt further monetary tightening and potentially affect oil demand, analysts said.

(Additional reporting by Matthew Robinson and Robert Gibbons in New York; Nia Williams in London; and Florence Tan in Singapore; Editing by David Gregorio and Jeffrey Benkoe)