Oil gains over 2 percent as dollar slips

By Richard Valdmanis

NEW YORK (Reuters) - Oil prices rose more than 2 percent on Friday as weakness in the U.S. dollar following a batch of soft jobs data outweighed fears of a demand slowdown in the world's biggest energy consumer.

News of a fire at an Exxon Mobil refinery in Los Angeles supported the gains, sparking fears over gasoline supply heading into the summer driving season.

U.S. crude CLc1 settled up $2.40 to $106.23 a barrel while London Brent LCOc1 crude gained $2.38 to $104.90.

The dollar dropped versus the euro after a U.S. government report showed employers slashed payrolls a third straight month in March, cutting 80,000 jobs. It was the biggest monthly job decline in five years.

"The payrolls data was initially supportive as the dollar weakened," said Eric Wittenauer, energy analyst at Wachovia Securities.

A weak U.S. dollar can support nominal prices for all commodities denominated in the currency, in part because it boosts non-U.S. purchasing power and draws money from investors seeking a hedge against inflation.

Adding support to the rally, Exxon Mobil reported a major fire at its Los Angeles refinery that shut down a hydrotreating unit at the plant

The problem at the refinery triggered concern over gasoline supplies heading into vacation season, after low domestic production prompted nationwide stockpiles of the key motor fuel to fall for the third week in a row.