NEW YORK (Reuters) - Oil prices rose a third straight day on Friday and posted weekly gains as data showing rising U.S. employment countered pressure from a stronger dollar and fading euphoria from Greece's debt swap deal.
U.S. nonfarm payrolls exceeded expectations by rising 227,000 in February, the third straight month that gains topped 200,000. The unemployment rate held at a three-year low of 8.3 percent.
"Today's U.S. employment report for February was positive across the board and confirms that improvements in the U.S. job market are real," said Jason Schenker, president of Prestige Economics LLC in Austin, Texas.
Oil's price trajectory was choppy, buffeted by pressure from a stronger dollar, supportive news of Greece's bond swap deal to avoid a disorderly default, and Chinese data showing that inflation had cooled, giving policymakers room to ease monetary policy to fight slowing growth.
Brent crude rose 54 cents to settle at $125.98 a barrel, trading from $124.69 to $126.37. Brent posted a 1.88 percent weekly gain, the sixth weekly rise in seven weeks.
U.S. crude rose 82 cents to settle at $107.40 a barrel after tug-of-war trading from $106.13 to $108.20. For the week, U.S. crude rose marginally, 0.66 percent, after losing 2.8 percent last week.
Brent's premium to U.S. crude ended at $18.58 based on settlements, but dropped below $18 a barrel intraday.
The dollar rallied broadly, initially rising as the euro yielded recent gains made on expectations the Greece deal would be implemented, then getting an additional lift from the employment report.
The dollar index .DXY rose 1 percent. A stronger greenback can pressure dollar-denominated oil by making it more expensive for consumers using other currencies and by attracting investment to foreign exchange markets seeking better returns.
Greece averted the immediate threat of an uncontrolled default after winning strong acceptance from its private creditors for a bond swap deal expected to clear the way for a new bailout.
But Greece's use of legislation that forces losses on all private creditors triggered the payment on default insurance contracts, the International Swaps and Derivatives Association said on Friday.
The ISDA ruling means a maximum of $3.16 billion of net outstanding Greek credit default swap contracts could be paid out.
While the spotlight was on the employment data, a separate report showed the U.S. trade deficit rose more than expected in January with the gap reaching its widest since October 2008.
Some brokers and analysts cautioned that the trade deficit data could limit the optimism accruing from the jobs gains and cap oil's rally.
MIDDLE EAST TENSIONS
Iran's dispute with the West over its nuclear facilities and enrichment program and the violent turmoil in Syria continue to hold oil investors' attention.
The International Atomic Energy Agency (IAEA) does not rule out that Iran may be trying to remove evidence from a military site that IAEA inspectors want to visit, the agency's chief said on Friday.
IAEA chief Yukiya Amano's comments came a day after six world powers demanded Iran keep its promise to allow inspectors into the Parchin military complex as part of the U.N.'s monitoring of Tehran's nuclear program.
Syrian forces killed at least 54 people on Friday, opposition activists said, as the government sought to quell demonstrations against President Bashar al-Assad before a peace mission by U.N.-Arab League envoy Kofi Annan.
In Saudi Arabia's neighbor Bahrain, tens of thousands demonstrated to demand democratic reforms, led by Shi'ite clerics.