By Jerry A. DiColo Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Crude futures were nearly flat Thursday, as traders paused following a mixed report on U.S. unemployment after a strong rally earlier in the week. Light, sweet crude for January delivery recently traded 12 cents lower at $86.63 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 31 cents higher at $89.18 a barrel. U.S. initial unemployment claims climbed by 26,000 to 436,000 in the week ended Nov. 27, the Labor Department said Thursday in its weekly report. The rise was larger than expected, but the four-week moving average, which aims to smooth out fluctuations in the data, fell to the lowest level in more than two years. The data follow a series of economic reports this week that have suggested the economy is improving, an important sign for the oil market as investors try to gauge future demand. But the recent rally above $86 a barrel has left traders looking for additional signals from the broader economy before pushing prices higher. "With the big run up people are a little bit nervous about getting long oil," said Rich Ilczyszyn, a market strategist with Lind-Waldock. On Wednesday, data showed U.S. productivity rose more than expected in the third quarter. A seperate report showed the largest monthly increase in private sector jobs in three years. Improving economic conditions in the U.S., the world's largest oil consumer, are vital to continuing the drawdown in global supplies that piled up through the recession. Inventories of U.S. crude and oil stockpiles have fallen from 27-year highs hit in September. On Wednesday, traders looked past a surprise rise in weekly stockpiles. Instead, they focused on a sharp decline in the dollar, which makes oil cheaper for buyers in other currencies, and optimistic economic reports from the U.S. and China. Gasoline futures continued their rise Wednesday, hitting fresh six-month highs even as oil prices treaded water. Traders worried about tight supply conditions in New York harbor, the delivery point for Nymex gasoline. New York's spot market gasoline pricing widened sharply compared to futures Wednesday amid supply concerns related to the shutdown of a key gasoline-making unit in Saint John, New Brunswick. The change in pricing for contracts that provide for gasoline delivery over the next year, "suggests the market is concerned that physical tightness might become entrenched," said Antoine Halff, an oil analyst with Newedge. Front-month January reformulated gasoline blendstock, or RBOB, recently traded 2.32 cents higher at 2.3236 a gallon. January heating oil recently traded 0.66 cent higher at $2.4122 a gallon. -By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com.

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