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Oil prices reached their highest level in nearly 18 months on Monday, pushing beyond the narrow range they were trading at during the first quarter of 2010, as the markets reacted to last week’s jobs report.

What prices are doing: Crude oil prices for May delivery rose $1.75, settling at $86.62. That’s their highest level since Oct. 8, 2008, when crude settled at $88.95.

What’s moving the market: Monday was a light trading day for oil, as markets across Europe were closed for the day-after Easter holiday. Markets in Hong Kong and China were also closed.

Reports showing job growth and increased manufacturing and services activity have driven oil prices up, as investors expect U.S. demand for oil to increase hand-in-hand with an economic recovery.

Monday marked the first day investors could react to Friday’s U.S. jobs report, since markets were closed for Good Friday.

The report showed that employers added 162,000 jobs last month, after dropping 14,000 jobs in February. The unemployment rate was unchanged at 9.7%.

Investors also welcomed a report showing significant growth in the service sector in March. The Institute for Supply Management’s non-manufacturing index, released Monday, rose 4.5% higher from February.

What analysts are saying: “People are looking at U.S. economic indicators and they’re seeing the signs that things have improved, and that’s been one of the things strutting this on,” said Rachel Ziemba, an energy analyst with Roubini Global Economics. “But it’s too soon to tell the strength of this recovery.”

Crude oil has been trading in the high $70s and low $80s since late December, and is reaching a key testing point as it surpasses the $85 mark, Ziemba said. The question now is: How long will the market be able to sustain the higher prices?

“I don’t see much support above $85. Economic growth both in the U.S. and globally could slow significantly in the second half of the year,” Ziemba said.

Looking ahead: Investors will be looking closely at news surrounding tensions on Chinese currency after Treasury Secretary Timothy Geithner said Saturday he would delay an April 15 report on whether China manipulates its currency.

American officials are putting pressure on China to allow the yuan to appreciate in value. The Chinese government has kept the yuan relatively unchanged against the dollar since mid-2008.

China is the world’s second-largest energy consumer after the United States and any news about the country’s monetary policy can be a major market mover for oil prices. To top of page

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Oil prices broke through the $70 per-barrel barrier Friday and more forecasters are broadening expectations for an upward swing in crude.

Benchmark crude for July delivery lost 37 cents to settle at $68.44 on the New York Mercantile Exchange, finishing the week with a gain of nearly $2 a barrel.

Earlier in the day oil jumped as high as $70.32 per barrel, the highest since October.

Oil prices have been soaring for months despite a massive surplus of petroleum and natural gas. A large amount of speculative money has flowed into the markets, according to government reports, potentially taking advantage of a weak U.S. currency.

Surging energy prices appear to be outpacing an economic recovery for now, and there are concerns that consumers may pull back spending further, especially with retail gasoline nearing the $3 mark.

“That everyday, in-your-face experience of seeing higher gas prices at the pump; that has quite an impact on people’s psyche,” said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

“There’s this feeling of ‘here we go again’ with what happened last year,” Kloza said.

“It hurts discretional spending.

“It leaves people to think about not taking those summer vacations.”

This week, Goldman Sachs revised its forecast and predicted that oil would rally to $85 a barrel by the end of the year as the economy stabilizes and OPEC production cuts take hold.

The forecast assumes, however, that the Organization of Petroleum Exporting Countries will stick to its cuts – and that has never been a sure bet.

Yet even news that could be perceived as negative on the surface has brought more money into oil markets.

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