By Nick Godt & Claudia Assis, MarketWatch
SAN FRANCISCO (MarketWatch) -- Crude-oil futures topped $86 a barrel Monday, reaching 18-month highs, as investors had a chance to react to a U.S. jobs report that showed the biggest gain in nonfarm payrolls in three years and fueled hope for a recovery in energy demand.
U.S. markets were closed on Friday for the Easter holiday as the payrolls data were released, and some markets in Europe remained closed on Monday.
Crude for May delivery gained $1.64 to stand at $86.50 a barrel on the New York Mercantile Exchange, up 1.6% and adding to earlier gains.
Prices hit $86.59 on Oct. 9, 2008.
The job gains for March, while smaller than expected, nevertheless were "taken as a sign that the economic recovery is on track," said Tim Evans, analyst with Citi Futures Perspective, in a report Monday.
"A weaker U.S. dollar was also helping support energy prices, along with a range of other commodities," Evans said.
Last Thursday, oil futures had gained more than 1%, rising for a fourth consecutive session after a raft of positive economic reports from the U.S., Asia and Europe.
On Friday, the Labor Department reported the U.S. economy added 162,000 to nonfarm payrolls in March, compared to some estimates that called for as much as an increase of 300,000.
Investors willing to pay higher prices for oil are doing so "on the mistaken belief that a strong sustainable recovery is underway, even though there is scant evidence to support such an idea. ... The market looks strong from a technical perspective if not a fundamental one," Mike Fitzgerald, analyst with MF Global, said in a Monday note.
Monday's round of economic data also proved a catalyst for oil prices.
Home buyers came back into the market in February, the National Association of Realtors said, reporting an 8.2% increase in its pending home sales index. Economists had been looking for a decline or a small increase in the index in February.
Separately, the service sectors of the U.S. economy improved sharply in March, the Institute for Supply Management reported. The ISM non-manufacturing index rose to 55.4% from 53.0% in February, an increase well above expectations as economists had been projecting the index would rise but just to a reading of 54%.
