Oil rally tempered by stronger dollar, jobs data

The weeklong rally in oil prices leveled off on Friday as a stronger dollar tempered investor enthusiasm for crude.

Benchmark oil for December delivery rose 36 cents to settle at $86.24 a barrel on the New York Mercantile Exchange. The price wobbled between small gains and losses after hitting a high for the year of $87.22 a barrel earlier in the session.

At the pump, the national average for a gallon of unleaded gasoline rose to $2.819 Friday, according to AAA, Wright Express and the Oil Price Information Service. That's a penny more than a week ago and 13.7 cents higher than a year ago.

There was encouraging news on the economic front, as the Labor Department reported that employers added 151,000 jobs last month, the first net gain in five months. The unemployment rate remained at 9.6 percent.

The jobs report could signal more improvement in the economy, which could lead to stronger demand from consumers and businesses for energy products.

It also helped strengthen the dollar against the euro and other currencies, which dampened enthusiasm for oil, according to energy analyst Stephen Schork. Oil and other commodities are priced in dollars, so a stronger dollar makes them more expensive for buyers using foreign currencies.

"If the data starts to improve a little bit, then, of course, we'll see some strength in the dollar and that could push commodities down a little bit," PFGBest analyst Phil Flynn said.

Oil has been climbing on a weaker dollar stemming from the Federal Reserve's decision to pour billions into a bond-buying program through the middle of next year to try to stimulate the economy. The plan effectively will decrease already low interest rates. The aim is to boost lending and spur business activity. At the same time, the influx of dollars weakens the U.S currency.

Many analysts think oil prices could climb to $90 a barrel by the end of the year. That would push retail gasoline prices close to $2.90 a gallon even though supplies of oil and gasoline remain plentiful, Flynn said.

On Thursday the National Resources Defense Council, an environmental group, identified states where drivers are most vulnerable to oil price hikes, in terms of the states' oil dependence and transportation policies.

NRDC found that Mississippi drivers spent about two and a half times more of their income for gasoline compared with Connecticut drivers. Citizens of Mississippi, Montana, Louisiana, Oklahoma, South Carolina, Texas, Kentucky, Utah, Idaho and Arkansas were listed as most vulnerable to price increases.

NRDC said California, Oregon, Massachusetts, New York, Connecticut, Washington, Pennsylvania, Minnesota, New Mexico and Hawaii are doing the most to promote clean energy and reduce oil reliance.

Crude supplies are about 14.2 percent above the five-year average, gasoline supplies are 6 percent above the five-year average and distillates, which include heating oil and diesel, are 18.8 percent above the five-year average, according to the Energy Department.

"Just looking at those inventory numbers and what you're paying for a gallon of gasoline, you realize that there's more behind the price of oil and gas than just supply and demand," he said.

In Nymex trading in December contracts on Thursday, heating oil added 1.17 cents to settle at $2.3848 a gallon, gasoline gained 0.29 cent to settle at $2.1800 a gallon and natural gas rose 8.1 cents to settle $3.937 per 1,000 cubic feet.

In London, Brent crude picked up 11 cents to settle at $88.11a barrel on the ICE Futures exchange