Oil prices rose above $85 a barrel Monday, extending gains from last week as investors bet an improving U.S. job market will herald growing crude demand.
By early afternoon in Europe, benchmark crude for May delivery was up 56 cents to $85.43 a barrel in electronic trading on the New York Mercantile Exchange, but down from a peak of $85.89 earlier in the session. On Thursday, the contract climbed up $1.11 to settle at $84.87 following a gain of $1.39 on Wednesday.
Global oil trading was closed for the Good Friday holiday.
Crude has jumped from $69 a barrel in early February on expectations a growing U.S. economy will eventually spark higher oil consumption.
On Friday, the U.S. Labor Department said employers added 162,000 jobs in March, the largest job gain in three years. The unemployment rate stayed at 9.7 percent for the third straight month.
"The market was positive before but now it's been confirmed," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "If the job growth can be sustained for several months, we'll definitely see crude demand pick up."
Analysts, however, warned that the rise in oil prices caused by speculative investments could harm the recuperation of the global economy.
"The last time we had oil prices at current levels, what followed was the worse recession ever and we will worry about what the combination of what is still high unemployment and higher fuel expenditure does to the economic recovery," said Olivier Jakob of Petromatrix in Switzerland. "On a fundamental basis we still do not see the indicators that would justify crude oil to trade at $90 a barrel."
"We still expect that this technical rally will start to work its way against the economic recovery," Jakob said.
Edward Meir, senior commodity analyst at MF Global in New York, said higher oil prices were part of an overall surge in the value of commodities, with investors betting that commodity prices will benefit as the global recovery picks up steam.
"The flip side to this argument is that the rally has already discounted a recovery, and that continued gains, particularly in energy, could potentially slow growth down, increase inflation and interest rates, and in a worst case, short-circuit the very recovery markets have been banking on," Meir said.
In the near term, nonetheless, oil prices will likely go higher.
"Technically, there is very little resistance showing on the charts given the upside breakout evident, which means that prices will likely have to define their own tops at this stage," Meir said.
In other Nymex trading in May contracts, heating oil rose 1.43 cents to $2.2310 a gallon, and gasoline gained 1.83 cents to $2.3420 a gallon. Natural gas fell 4.2 cents to $4.044 per 1,000 cubic feet.
In London, Brent crude was up 36 cents at $84.37 on the ICE futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.