| NEW YORK
NEW YORK Oil rose for the fourth day in a row on Thursday, closing at the highest level in 18 months, after upbeat U.S. economic data signaled better oil demand ahead, prompting fund buying as the new quarter began.
A dip in the dollar against the euro and a basket of currencies also sparked buying, traders said.
Ahead of the long holiday weekend and with the key March U.S. jobs report due on Friday, traders also covered short positions, helping push the market higher for the fourth consecutive session, analysts said.
"This looks like a short-covering rally ... traders don't want to go home with a lot of shorts, knowing the important jobs data will be released on Friday, when the energy markets are closed," said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.
Short positions are bets that prices will fall.
U.S. crude for May delivery settled up $1.11, or 1.3 percent, at $84.87 a barrel, the highest close since October 9, 2008. It hit the day's high at $85.22, also the highest since that day.
For the week, U.S. crude rose $4.87, or 6 percent.
London ICE Brent closed up $1.31, or 1.6 percent, at $84.01 a barrel, highest since October 8, 2008. It posted the day's high at $84.33.
Brent crude gained $4.72, or 6 percent, for the week. The number of Americans filing new claims for jobless benefits fell last week and factory activity in March hit its highest level in more than 5-1/2 years, bolstering confidence of a continued expansion in the economy.
"Upward momentum is very strong," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
"Money is flowing into commodities at the beginning of the new quarter from all sorts of investors, including funds," he added.
The euro rallied against the dollar, lifted by quarterly positioning as investors looked ahead to the U.S. non-farm payrolls data on Friday. The dollar .DXY also fell against a basket of currencies.
Simmering geopolitical tensions amid talk of a possible new round of sanctions against Iran, maybe within weeks rather than months, could be underpinning the market, said Edward Meir at brokers MF Global.
China on Thursday said it will join talks on imposing new sanctions on Iran and President Hu Jintao's visit to Washington this month could set the stage for tougher action on Tehran.
Ahead of Friday's jobs data, the median projection from the 20 economists who have forecast payrolls most accurately over the past year in Reuters' polls predicts 200,000 jobs were created last month.
That is slightly higher than the 190,000 median forecast from the broader sample of 82 analysts in the latest Reuters poll.
A rise would mark only the second time payrolls have risen since the recession started in December 2007, although this might be partly on the back of hiring for the 2010 census.
Oil markets have ignored Wednesday's government report of the ninth consecutive weekly build in U.S. crude stocks, and a surprise, if small, rise in gasoline supplies.
U.S. government data showed U.S. crude inventories rose by 2.9 million barrels to 354.2 million barrels last week, Gasoline stocks logged an unexpected 300,000-barrel gain.
"Many are looking at the fact that total implied refined product demand is now in positive territory versus both last year and the five year average for the same week," Dominick Chirichella, senior partner, Energy Management Institute in New York, said in a report.
(Additional reporting by Robert Gibbons in New York, Christopher Johnson in London; Alejandro Barbajosa in Singapore; Editing by Lisa Shumaker)