Picture: REUTERS
Picture: REUTERS

OIL rose above $107 a barrel on Friday, trimming its weekly decline, supported by a better-than-expected US employment report and expectations of a recovery in Chinese growth.

US nonfarm payrolls rose 146,000 in November, the Labour Department said, defying expectations of a sharp pullback.

Annual growth in Chinese factory output, investment and retail sales may have gained pace in November, a Reuters poll showed ahead of figures on December 9.

Brent crude added 61 cents to $107.64 by 2.48pm GMT, after dropping for four straight sessions. For the week, Brent was down about 3.4%, still the biggest decline since the week to November 2. US crude gained 35 cents to $86.61.

"The employment report indicates growing strength in the economy, despite the downward job creation revisions also contained in the report," said John Kilduff, partner at Again Capital in New York.

"The energy complex has been flagging of late, so the demand that translates from increasing employment will be supportive of prices."

Economic worries about both sides of the Atlantic have curbed investor appetite for riskier assets, putting the Thomson Reuters-Jefferies CRB index, a bellwether for commodities, in negative territory so far this quarter.

Germany’s Bundesbank cut its growth outlook for next year on Friday as the euro zone debt crisis takes its toll on Europe’s largest economy, but added that the country would return to its growth path soon.

Adding to the jitters was the political impasse on the US fiscal policy.

With about three weeks left before the "fiscal cliff" deadline, the task of avoiding the steep tax hikes and spending cuts was down to talks between Republican House Speaker John A. Boehner and President Barack Obama, according to Capitol Hill aides.

Federal Reserve policymakers are scheduled to meet on December 11-12 to review monetary policy. Oil exporter group OPEC also meets next week, on Wednesday, and is not expected to alter output policy.

Investors were monitoring developments in the Middle East where a worsening political crisis in Egypt and conflict in Syria has heightened worries about oil supply from the region.

The violence in Egypt has not affected prices although they could rebound should the market return to a focus on supply risks rather than demand weakness, according to Commerzbank.

"Concerns about demand have currently gained the upper hand," said Carsten Fritsch, an analyst at the bank. "We regard the scale of the price slide as exaggerated and expect prices to recover."

Reuters