Oil spikes above $108 US

Oil prices briefly spiked to near $108 US per barrel Friday after a report that exports from Iran had tumbled this month.

Light sweet crude for May delivery closed higher by $1.52, at $106.87, after earlier jumping by as much as $2.90 to $108.25.

Iran, the world's third-largest oil exporter, has been locked in a high-stakes standoff with the West over its nuclear program.

The U.S. and Europe, who fear that it is building a weapon, are using financial sanctions to pressure Iran to open its facilities to inspection.

The report said Iran's shipments have tumbled by 300,000 barrels per day, or 14 per cent, in March. That would be a strong sign that the sanctions are starting to impact the country's oil industry.

The gain helped the commodities-weighted Toronto Stock Exchange. The S&P/TSX composite index closed up 103.85 points at 12,465.66

Loonie rebounds

The rise in oil — Canada's biggest commodity export — also caused the Canadian dollar to take a u-turn. After falling below parity for the first time since March 6 and losing as much as 0.83 of a cent, the loonie rebounded to close up a tenth of a cent at 100.13 cents US.

The Canadian dollar initially lost ground on signs of growing strength in the U.S. economy, which would be positive for the greenback, and concerns about slipping demand for commodities as China's economy slows, have helped push the loonie down.

The fall came despite data from Statistics Canada that found gasoline and food continued to push up inflation in February to 2.6 per cent, the second consecutive monthly increase.

Sustained higher inflation would suggest the Bank of Canada would raise intererest rates, exerting upward pressure on the loonie.

Core inflation — the underlying pressure on consumer goods, excluding volatile items such as energy and fresh foods — rose two notches to 2.3 per cent, above the Bank of Canada's two-per-cent target line.

But Emanuella Enenajor of CIBC World Markets said it's not clear yet whether Canada has entered a period of sustained higher prices

Although February's data represented the fastest pace of price increases since 2008, said Enenajor, "the rise in the ex-volatile rate could prove temporary, so the Bank of Canada will likely look through today's elevated reading — suggesting limited policy implications."