By Alison Sider 

Oil prices vaulted higher Friday after reports of a refinery outage kicked off a rally that continued throughout the afternoon as the dollar weakened and data showed a decline in the number of rigs drilling for oil in the U.S.

U.S. crude futures rose $1.42, or 3.02%, to $48.51 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose $1.69, or 3.31%, to $52.72 a barrel on ICE Futures Europe -- its biggest daily increase since Dec. 1.

The two benchmarks diverged this week. U.S. crude futures fell for a third week in a row, following data showing rising output, while the global benchmark ended the week up 1.19%.

Prices had been languishing Friday morning, but moved sharply higher after Reuters reported that the hydrocracking unit at Exxon Mobil's Baytown, Texas, refinery shut down, citing sources familiar with the plant's operations. The 560,500 barrel-a-day plant is the second-largest refinery in the U.S., according to figures from the U.S. Energy Information Administration.

An Exxon spokeswoman declined to discuss the unit's operations and said an event that caused emissions at the plant earlier this week has ended with minimal impact to production.

Problems that disrupt fuel-making activity at refineries often lead higher gasoline and diesel prices higher. As that happened Friday, the difference between fuel prices and oil, known as the "crack spread," widened. That triggered a wave of crude buying, pulling prices higher, traders and brokers said.

Gasoline futures settled up 3.71 cents or 2.34%, at $1.6240 a gallon. Diesel futures rose 3.84 cents, or 2.43%, to $1.6204 a gallon.

The market's reaction Friday followed a similar pattern from Thursday when oil prices flipped from losses to gains after a fire at Royal Dutch Shell PLC's Deer Park, Texas, crude unit.

The rally gained steam Friday as prices broke through key technical levels that encouraged more buying.

"Once you got above yesterday's highs, the algos kicked in and started pushing it higher," said Michael Hiley, a trader at LPS Futures LLC, referring to computer-algorithm based trading systems, which have become more influential in the oil market this year.

Light trading volumes going into the weekend likely also contributed, analysts and brokers said.

"The bears are being run over by some of the near-term bulls," said Donald Morton, senior vice president at Herbert J. Sims, who oversees its energy trading desk.

The falling dollar also boosted oil prices. A weaker dollar makes dollar-traded oil less expensive for foreign buyers. Oil futures often rise when that happens.

And oil-field services firm Baker Hughes Inc. reported that the number of rigs drilling for oil in the U.S. fell by five in the latest week, the latest sign that drillers are responding to lower oil prices by pulling back.

Figures earlier this week showing that U.S. oil output rose by 79,000 barrels a day during the week ended Aug. 11 prompted renewed worries that higher output from the U.S., along with Nigeria and Libya, is undercutting efforts by the Organization of the Petroleum Exporting Countries and others to work off a supply glut.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

August 18, 2017 16:32 ET (20:32 GMT)

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