* Shipping through Suez unaffected, ports operational
* Libya's main export terminal halted, adding to outages
* North Sea Forties exports to fall in August
* U.S. nonfarm payrolls rise more than expected in June (Updates prices to settlement)
By Jeanine Prezioso
NEW YORK, July 5 (Reuters) - Oil prices jumped nearly $2 a barrel on Friday to notch their biggest weekly gain in a year, boosted by concerns over rising tensions in Egypt and better-than-expected U.S. economic data.
Prompt U.S. oil prices initially lagged gains but rallied later in the day, extending this week's abrupt gains in spreads on speculation that U.S. Midwest oil supplies are poised to tighten. The September versus October U.S. West Texas Intermediate spread
Oil investors focused on signs of renewed geopolitical risk in Egypt. Fighting broke out in Cairo after the Muslim Brotherhood movement called for a "Friday of Rage" to protest the ouster of President Mohamed Mursi. News of protests near the Suez Canal added to the alarm for oil traders.
U.S. crude oil prices extended their string of 14-month highs. Front-month U.S. crude oil futures settled $1.98 per barrel higher, or 1.96 percent, at $103.22, after touching a high of $103.32. Trading volume was thin due to the Independence Day holiday on July 4.
U.S. oil gained 6.7 percent for the week, the largest weekly percentage gain since October 2011.
Brent crude oil for August delivery traded at a three-month high and ended $2.18 per barrel higher, or up 2.07 percent, at $107.72 after hitting a high of $107.88.
Brent gained more than 5 percent on the week and showed its highest weekly percentage rise since last June.
Oil prices vacillated earlier in the day after data showed that U.S. employers added 195,000 new jobs to their payrolls last month, more than expected.
The U.S. dollar index surged 1.5 percent while gold and copper fell nearly 3 percent after the data was seen drawing Federal Reserve closer to scaling back its massive monetary stimulus later this year, which would sap liquidity and drag on commodity prices.
But for oil markets, the potential upside from increased economic activity outweighed risks from the rising dollar and possible policy tightening, said Matt Smith, commodity analyst at Schneider Electric in Louisville, Kentucky.
SUPPLY TIGHTENS, MIDEAST TENSIONS WEIGH
Crude oil extended gains late afternoon after the leader of Egypt's Muslim Brotherhood, Mohamed Badie, told a protest rally that ousted president Mohamed Mursi must be reinstated following his removal by the army - "otherwise its our lives".
"There's enough bullish interest in owning oil that these kinds of headlines will continue to draw fresh bullish positions," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
The Egyptian military took control of the nation on Wednesday, overthrowing Egypt's first freely elected president in what his Islamist supporters are calling a military coup. Supporters of the deposed leader demonstrated in cities across the country on Friday.
So far, ports and shipping through the Suez Canal have been operating normally, two shipping sources and a canal official said.
Other factors are also tightening European oil supplies. Maintenance on the North Sea Forties crude oil field in August will reduce the amount of benchmark oil that underpins the Brent contract.
Libya's largest export terminal was shut late on Thursday. Port guards locked the gate over salary complaints, preventing workers from continuing operations.
The closely watched spread between global benchmark Brent crude oil and U.S. West Texas Intermediate
Brent's premium to WTI crude at one point on Wednesday narrowed to $3.09, the weakest since December 2010, after U.S. government data showed a 10 million barrel drop in stockpiles. (Reporting by Jeanine Prezioso; Additional reporting by Julia Payne in London and Florence Tan in Singapore; Editing by Andrea Ricci, Peter Galloway and David Gregorio)