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Oil Closes Above $76 as U.S. Sheds 4,000 Jobs

Oil prices rose Friday as tight supplies in the United States countered worries about a possible economic recession in the world's top energy consumer.

U.S. light, sweet crude settled up 40 cents at $76.70 per barrel, after falling as low as $75.63 earlier.

London Brent crude settled 30 cents higher at $75.07 a barrel.

The price of oil has climbed close to the all-time record $78.77 a barrel struck on Aug. 1 amid refinery problems in the United States, Middle East tensions and output cuts by the Organization of Petroleum Exporting Countries.

But the rally has been tempered by economic troubles that analysts fear could undermine future demand for oil.

U.S. employers cut payrolls by 4,000 jobs in August, the first reduction in four years, compared with economists' forecasts for an increase of 110,000 jobs. The data sent the dollar and world stock markets tumbling.

"This may be the canary in the coal mine as far as demand (is concerned) going forward," said John Kilduff, senior vice president at MF Global.

"Certainly, in the past years with high oil prices we've always pointed to employment numbers holding up as a reason oil demand was not being hit."

Oil prices rose Thursday after a U.S. government report showed U.S. crude inventories fell by a higher-than-expected 3.9 million barrels last week.

Gasoline stocks fell 1.5 million barrels to the lowest level in two years, due to a series of outages in the aging U.S. refining system and strong summer demand.

Middle East Tensions

Adding to supply worries was tension in the Middle East, the source of nearly a third of world oil, after Syria accused Israel of bombing its territory and warned it could respond.

Near-record prices are signaling that the world market is very tight, the new head of the International Energy Agency told Reuters Thursday.

But several OPEC members say there was no need to change output curbs when the group meets Tuesday in Vienna.

"Recent price action appears a good reflection of the current market environment characterized by a combination of firming fundamentals, geopolitical tensions and growing nervousness ahead of next week's OPEC meeting," Barclays Capital said in a report.

Some analysts expect stronger demand in the fourth quarter, causing a supply crunch unless OPEC pumps more.