* U.S. crude hits $107.84, highest since September 2008
* U.S. non-farm payrolls for March stronger than forecast
* Choppy trading as strong dollar hurts oil
(Updates prices, payrolls data)
By Nia Williams
LONDON, April 1 (Reuters) - Oil prices cut back gains of
over a dollar on Friday after stronger-than-expected U.S. jobs
data indicated the improving economic recovery of the world's
largest oil importer was firmly on track, boosting the dollar.
Although a stronger recovery should lead to increased demand
for crude, the data sent the dollar higher amid expectations the
U.S may move away from its current ultra-loose monetary policy
which tends to benefit riskier assets like commodities.
A stronger dollar can also weaken dollar-denominated oil
prices because it increases the price of oil for consumers using
other currencies.
U.S. crude futures <Clc1> were 17 cents higher at $106.89 at
1333 GMT after earlier climbing to $107.84, a level last touched
in September 2008. Brent crude for May delivery <LCOc1> rose 2
cents to $117.38, the highest level in nearly four weeks.
"There are two opposing factors here," said Thorbjoern
Jensen, analyst at Global Risk Management. "This data should be
bullish for oil but the dollar effect and the rate effect is
taking the steam out of it."
Payrolls showed a total of 216,000 nonfarm U.S. jobs were
added in March, the government said, well above the 190,000
expected in a Reuters poll.
A growing economy will encourage Federal Reserve chairman
Ben Bernanke to shift his focus towards inflation, increasing
the potential for an interest rate hike which would further
strengthen the dollar.
John Kilduff, partner at Again Capital LLC in New York, said
the mixed reaction to the data was unsurprising.
"Crude may not react very much to the improving employment
data, as the reading may stabilize the dollar and allow the
Federal Reserve to further signal a pullback from its
aggressiveley loose monetary policy," he said.
"While increased employment should help energy demand, there
are greater forces at work in the commodity sector."
LIBYA, MIDDLE EAST TURMOIL
Fighting in Libya, where Muammar Gaddafi's forces appear to
have regained the upper hand, 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.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
More on Middle East unrest: [] []
Libya Graphics http://link.reuters.com/neg68r
Interactive graphic http://link.reuters.com/puk87r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
On Friday, as government forces pounded the city of Misrata
in the west, a rebel official detailed how Qatar will provide
fuel, medicine, food and other humanitarian needs as part of a
deal to market oil from the rebel-held east. []
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.
Further supply disruption came from Gabon, which produces
between 220,000 and 240,000 barrels a day, where striking
workers are shutting half the central African nation's crude oil
output on Friday and plan to halt the remaining output within 48
hours. []
Bahrain has stepped up arrests of cyber activists and
Shi'ites and protests broke out in three Syrian cities against
Baath Party rule after Friday prayers, a favoured time for
demonstrations in the Middle East.[][]
(Additional reporting by Alejandro Barbajosa and Robert
Gibbons; editing by Keiron Henderson)
