Oil falls after setting record

NEW YORK (AP) - Oil prices jumped to a new record above $106 Friday but settled lower, extending their recent pattern of choppy trading after a weak jobs report convinced many traders that the Federal Reserve’s interest rate cutting campaign will continue.

Employers cut 63,000 jobs in February, the biggest drop in five years, the Labor Department said. Investors can react to such news in one of two ways: by selling on the prospect that the economy, and demand for oil, is cooling, or by buying on a conviction that bad economic data makes it more likely the Fed will cut rates.

On Friday, investors engaged in a little of both, sending oil prices down more than a dollar at one moment, and propelling them to new records the next.

"The higher the market goes, the more volatile it becomes," said Darin Newsom, senior analyst at DTN in Omaha, Neb. "Does it mean that the rally is over? No."

Light, sweet crude for April delivery fell 32 cents to settle at $105.15 a barrel on the New York Mercantile Exchange. But prices fluctuated widely, setting a new trading record of $106.54 and falling as low as $103.91.

At the pump, meanwhile, gas prices extended their march toward new records, rising 0.4 cent to a national average of $3.189 a gallon, according to AAA and the Oil Price Information Service. Gas prices are 68 cents higher than a year ago, and within a nickel of last May’s record price of $3.227 a gallon. Many analysts expect prices to jump much higher as driving demand picks up in the spring.

Lower interest rates tend to weaken the dollar, and many analysts believe the weak dollar is the reason why oil set new inflation-adjusted records four times this week, and has risen 23 percent in less than a month.

Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling. On Friday, the dollar set a new low against the euro Friday before rising. But most investors believe that despite occasional rebounds, the dollar is likely to continue falling as the Fed continues to cut rates.

"The swings in the dollar are still the most critical item," said Jim Ritterbusch, president of Ritterbusch and Associates, an energy consultancy in Galena, Ill.

Concerns about a possible conflict between oil producers Venezuela and Colombia also supported oil prices Friday.