Oil surges to highest level in 17 months on U.S. jobs report

Crude oil surged to the highest level in 17 months after reports of growth in U.S. jobs, home sales and non-manufacturing businesses signaled that the economy is recovering from the worst recession since the 1930s.

Oil rose as high as $86.57 a barrel as the economic data spurred optimism that fuel demand will increase as the economy rebounds. The U.S. is the world’s largest energy consumer. The Standard & Poor’s 500 Index climbed to an 18-month high.

“The market is in full embrace of the recovery thesis and is pricing it in accordingly,” said John Kilduff, a partner at Round Earth Capital, a New York-based hedge fund that focuses on food and energy commodities. “It’s enthusiasm that we’re coming out of this recession.”

Crude oil for May delivery increased $1.56, or 1.8 percent, to $86.43 a barrel at 10:42 a.m. on the New York Mercantile Exchange. Earlier, futures rose as much as 2 percent to the highest intraday price since Oct. 9, 2008. Crude has climbed 65 percent in the past year.

The S&P 500 gained 0.8 percent to 1,187.05.

U.S. payrolls rose by 162,000 last month, the Labor Department reported April 2, when U.S. financial markets were closed for the Good Friday holiday. The report showed payrolls were buoyed by 48,000 temporary workers hired by the government to conduct the Census.

More Americans signed contracts in February to buy previously owned homes. The index of purchase agreements, or pending home sales, rose 8.2 percent, the second-biggest gain on record and the largest since October 2001, after a revised 7.8 percent drop in January, the National Association of Realtors announced today in Washington.

U.S. service industries in March also expanded at the fastest pace since May 2006, according to the Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy. The index rose to 55.4 from 53 in the prior month, exceeding the median forecast of 54 in a Bloomberg News survey of economists.

“Economic data indexes are getting better and that is supporting crude oil prices,” said Ken Hasegawa, energy trading manager at broker Newedge in Tokyo. “Still, we need time to see quite a strong economic recovery” and prices may struggle above $87 without further evidence of growth, he said.

Brent crude oil for May settlement rose $1.61, or 1.9 percent, to $85.62 a barrel on the London-based ICE Futures Europe exchange.