Oil jumped on Thursday by the biggest percentage in two months, hitting a three-week high as U.S. data on jobless claims and retail sales came in stronger than expected, raising hopes that economic recovery was gaining traction.
Independent data showing U.S. private hiring surged in June set the stage for a possible upside surprise in Friday's U.S. non-farm payrolls report, traders said.
After weekly U.S. data showed a surprisingly small decline in oil stocks, ICE Brent crude extended its rally while the U.S. benchmark faltered.
The Brent/WTI spread blew out by $3 to top $20 a barrel, the widest since June 20, as production problems plagued North Sea oil supplies and as traders bet that European governments would release fewer barrels than expected under a global injection of emergency stocks that has failed to tame prices.
In London, ICE Brent crude futures for August delivery settled at $118.59 a barrel, gaining $4.97, or 4.4 percent, their biggest one-day gain since May 9. It hit a session high of $118.70, the highest intraday since June 15.
U.S. August crude lagged, rising by just $2.02, or 2.1 percent, to settle at $98.67, off its session high of $99.42 -- the highest intraday price since June 15.
Traders focused on the jobs-related data even after U.S. government data showed crude oil inventories fell by just 889,000 barrels last week. That decline was less than forecast and well below the 3.2 million barrel drawdown in an industry report on Tuesday.
"Prices are still up, with investors minding pundits' views that the economy will pick up in the second half," said Mark Waggoner, president of Excel Futures in Bend, Oregon.
U.S. private hiring surged in June, data from payrolls processor ADP showed while the Labor Department reported new claims for unemployment benefits fell more than projected last week.
Leading U.S. retailers reported better-than-expected sales for June, further boosting hopes for oil demand.
U.S. equities rallied on the economic data while the euro rose against the dollar, with investors now looking ahead to Friday's employment report to provide more evidence of a pick-up in growth. .N
Economists polled by Reuters prior to the ADP figures expected the report, due at 8:30 a.m. EDT on Friday, to show employers added 90,000 jobs in June.