U.S. crude oil futures rallied late in a choppy session on Friday, with gains attributed to pre-weekend short covering on top of the release of U.S. employment data showing stronger-than-expected jobs creation.
Another kidnapping incident of foreign workers in Nigeria and OPEC chatter about more action to stop falling prices helped support the market, analysts said.
On the New York Mercantile Exchange, February crude rose 72 cents, or 1.3%, to settle at $56.31 a barrel, trading from $54.90 to $56.40.
The early low in electronic trading was the first time the front-month price dipped under $55 since the Nov. 17 low of $54.86 that analysts said was tested Friday.
"We have potentially a double bottom forming at the day's low," said Phil Flynn, analyst at Alaron Trading in Chicago.
Flynn said the inability to push through that support caused shorts to cover and that there was already profit for shorts to take before the weekend after the recent slide.
In the previous two sessions, NYMEX crude futures fell more than $5 or 8.9% to post their biggest two-day percentage loss since early December 2004 as mild weather, especially in the U.S. Northeast, kept a lid on heating fuel demand.
In London, ICE February Brent crude rose 53 cents to settle at $55.64 per barrel, trading from $54.50 to $55.76.
Crude futures were boosted by data showing surprisingly strong growth in U.S. jobs in December. The Labor Department said that the U.S. economy generated 167,000 new jobs in December, well above market expectations for a rise of 100,000.
Also supportive was news gunmen in Nigeria's volatile southern Niger Delta abducted five Chinese workers Friday in what appeared to be a kidnapping for ransom, authorities said. Abductions for ransom are common in the oil-producing delta.
The Energy Information Administration reported that natural gas storage was down a slightly bearish 47 billion cubic feet last week. Analysts in a Reuters poll had forecast a 56 bcf draw.
OPEC producers implemented a 1.2 million barrel per day production cut in November and have another 500,000-bpd cut planned for February.
But top Libyan oil official Shokri Ghanem said Friday the cuts have not eradicated a market imbalance and the group may need to meet again in February or March.
But the group should wait to see the impact of supply cuts already agreed before making any further reduction, Nigeria's top oil official Edmund Daukoru said Friday.
"The 1.2 million bpd cut we announced in Doha has not fully kicked in. It will be good to see what happens after Feb. 1, to look at the level of compliance."
Meanwhile relatively mild weather has kept heating load curbed. Heating load in the U.S. Northeast was forecast to average much below normal for the next five days, with the six-to-10-day forecast for temperatures to average above normal, private forecaster DTN Meteorlogix said Friday.
NYMEX February heating oil rose 2.27 cents, or 1.47%, to settle at $1.5658 per gallon, trading from $1.5334 to $1.5713. On Thursday, it dropped as low as $1.541 which marked the cheapest level since $1.5398 on June 9, 2005.
February RBOB rose 0.61 cent, or 0.41%, to settle at $1.4931 a gallon, having traded as low as $1.46, the lowest price since the Oct. 30, 2006, low of $1.41.
TECHNICALS
NYMEX February crude support held above the chart low at $54.86, hit on Nov. 17. Resistance was charted $60.
Heating oil's support was charted at $1.50, with resistance at $1.60.
RBOB's support gave way at $1.50, with resistance seen at $1.60.