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NEW YORK (Reuters) - Crude oil futures rose for a second day on Thursday as investors cheered progress on Greece's bond swap deal, which moved the beleaguered country nearer to unlocking funds it needs to avoid default.
Tensions between Iran and the West over Tehran's nuclear ambitions provided further support.
U.S. data showed unemployment benefit claims rose last week, but not enough to change the outlook that the labor market was growing stronger. That view helped crude hold gains.
The jobless claims data bolstered expectations that Friday's U.S. government report on how the jobs market fared in February will show a solid rise in payrolls.
Spread trading on Brent and the U.S. crude benchmark West Texas Intermediate also lifted the day's trade.
"Worries of a debt default by Greece eased and market focus is returning to those factors that led oil futures to hit recent highs," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Those factors include fears of supply disruption should Iran's tensions with the West escalate again, McGillian said.
"Bright spots in the economic scene, such as the improving recovery in the United States, will be weighed against the slowdown that we're seeing in China," he added.
In London, ICE Brent crude for April delivery settled at $125.44 a barrel, gaining $1.32. It hit a session peak of $126.34, the highest since March 1, when front-month Brent hit $128.40, the priciest since July 2008.
U.S. April crude settled at $106.58 a barrel, rising 42 cents. It hit a session high of $107.20 in morning trade. Front-month U.S. crude reached $110.55 on March 1, the highest since May last year.
Brent's premium against U.S. crude widened to $18.86 at the close from $17.96 on Wednesday, when U.S. government data showed crude stocks at the Cushing, Oklahoma delivery hub shot last week to the highest level in eight months. That stock build helped boost Brent's premium to U.S. crude.
"The WTI/Brent spread is today's focus and $20 is your first upside objective," said Tony Rosado, options broker at GA Global Markets in New York.
Brent trading volume increased almost 10 percent from its 30-day average while dealings in U.S. crude fell 6 percent from the 30-day average, Reuters data showed.
Greece closed a bond swap offer to private creditors after clearing the minimum threshold of acceptance, a step closer to securing funds it needs to skirt a chaotic default. The deal's deadline was 3 p.m. EST (2000 GMT).
Nearly 95 percent of bondholders had signed up for the debt swap about an hour before the deadline, a Greek government official told Reuters.
The deal -- the biggest restructuring of sovereign debt in history -- will see bond holders accept losses of about 74 percent on their investments. All told, it would cut more than 100 billion euros ($133 billion) from Greece's public debt.
The European Union and the International Monetary Fund had made the bond swap deal a condition for their final approval of a 130 billion euro bailout for Greece agreed last month.
The euro rose to a global session high against the dollar on news of the swap deal, stirring "risk-on" trades on oil futures, other commodities and equities. In late trading, the dollar was down 0.68 percent against a basket of currencies. .DXY
Investors remained focused on the tensions over Iran's nuclear program, which have driven up oil prices recently.
Iran's supreme leader Ayatollah Ali Khamenei told news agency IRNA he welcomed U.S. President Barack Obama's words on a diplomatic "window of opportunity", but said that continued talk of sanctions showed "the illusion continues".
France on Wednesday voiced skepticism that a revival of talks between six world powers and Iran would succeed, saying Tehran did not seem sincerely willing to negotiate about the future of its nuclear program.
Led by the United States, the six powers demanded on Thursday that Iran fulfill a promise to let international inspectors visit a military installation where the U.N. nuclear watchdog believes explosives tests aimed at developing atomic bombs may have taken place.
Supply tightness could become more apparent as Royal Dutch Shell (RDSa.L) starts looking for alternative crude when its deliveries of Iranian oil under outstanding contracts come to an end to comply with sanctions within weeks.
GDP in Japan, U.S., Europe link.reuters.com/tys56s
Euro zone debt crisis graphics r.reuters.com/hyb65p
Other economic data also helped support oil prices, such as news that Japan's economy shrank less than initially estimated in the fourth quarter, as companies ramped up spending.
On Friday, the United States, the top oil consumer, will issue more-comprehensive private- and public-sector employment data for February. A Reuters poll forecasts a gain of 210,000 in nonfarm payrolls, with a rise in the private sector of 225,000 jobs offsetting a modest dip in government jobs.
Also on Friday, factory and inflation data from China should paint a clearer picture of the scale of economic slowdown in the world's second-biggest oil user.
Additional reporting by Robert Gibbons in New York and Zaida Espana in London; Editing by David Gregorio and Dale Hudson