A container ship sails along Nakhodka Bay near the oil terminal in the port city of Nakhodka
A container ship sails along Nakhodka Bay near the oil terminal in the port city of Nakhodka, Russia August 12, 2022. Reuters

Oil prices climbed more than 1% on Friday after better-than-expected U.S. employment data, though both benchmarks fell more than 3% on the week on U.S. interest rate hike jitters.

Brent rose $1.19, or 1.5%, to $82.78 a barrel. U.S. West Texas Intermediate crude (WTI) was up 96 cents, or 1.3%, at $76.68.

Expectations of further rate hikes in the world's largest economy and in Europe have clouded the global growth outlook and driven both crude benchmarks down this week.

However, the U.S. Federal Reserve may have less reason to raise interest rates as sharply or as high as some had thought after a government report on Friday rekindled hopes of easing inflation amid signs the pandemic-disrupted labor market is normalizing.

Fed Chair Jerome Powell has warned of higher and potentially faster rate hikes, saying the central bank was wrong in initially thinking inflation was "transitory". Its next monetary policy meeting is planned for March 21-22.

"Oil prices are fluctuating wildly on renewed fears of Fed interest rate increases," said Price Group analyst Phil Flynn.

A strengthening dollar is also making oil more expensive for holders of other currencies.

Global shares, which often move in tandem with oil prices, hit a two-month low as investors dumped banks.

Broader U.S. employment data for February beat expectations with nonfarm payrolls rising by 311,000, compared with expectations of 205,000 jobs added, according to a Reuters survey. This is likely to ensure that the Fed will raise interest rates for longer, which analysts have said would weigh on oil prices.

On the supply side, major oil producers Saudi Arabia and Iran, both members of the Organization of the Petroleum Exporting Countries, re-established ties on Friday after days of previously undisclosed talks in Beijing.

U.S. oil rigs fell by 2 to 590 this week, their lowest since June, according to data from Baker Hughes.

Meanwhile, the United States was reported to have privately urged some commodity traders to shed concerns about shipping price-capped Russian oil in a bid to shore up supply.

Investors are closely monitoring export cuts from Russia, which decided to trim oil output by 500,000 barrels per day in March.

U.S. President Joe Biden also proposed a budget on Thursday that would scrap billions of dollars in oil and gas industry subsidies.