Oil Posts Epic Rally

On news that European policymakers will extend economic lifelines to Spain and that help could be on the way for Italy if needed, oil futures surged Friday, posting their fourth-best one-day performance on record. NYMEX-crude for August delivery surged $7.27, or 9.4%, to $84.96 per barrel. That's good for the best one-day run for the U.S. benchmark contract in over three years. As traders flocked to riskier assets, the PowerShares DB US Dollar Index Bullish (NYSE: UUP) was crushed, falling 1.4% on heavy volume. Oil's move may have also been helped by traders knowing that the European Union's embargo on Iranian oil imports starts on Sunday. OPEC member Iran has already confirmed that its daily output is falling and is expected to fall more.

Still, some traders remain cautious about crude's Friday bounce with some saying the rally was too much too fast. There might be something to that line of thinking when accounting for three important economic data points out of the U.S. that were far from impressive.

In economic news, the Commerce Department said consume spending was flat in May and the April reading was revised lower to a gain of just 0.1% after an initial reading that showed an increase of 0.3%. Personal incomes rose 0.2%, matching economists' expectations. The Thomson Reuters/University of Michigan final reading of June consumer sentiment dropped to 73.2 from 79.3 last month. The June reading is the lowest since December 2011. Economists expected a reading of 74.1.

The Chicago PMI jumped to 52.9% in June from 52.7% last month. Economists expected a June reading of 53%.

Each of those data points imply the U.S., the world's largest oil consumer, is still home to a flagging economy. That alone supports the notion that profit-taking in the oil pits could reign supreme come Monday.

In the meantime, investors can bask in the glow of some tidy gains for oil equities on Friday, a day that was the best one in weeks for the downtrodden sector. With the Dow Jones Industrial Average posting a gain of almost 278 points, shares of Exxon Mobil (NYSE: XOM) surged almost 3%. Rival Chevron (NYSE: CVX) added nearly 2%. The Energy Select Sector SPDR (NYSE: XLE) added 3% on volume that was well above average.

Natural gas got in on the energy ebullience as well as the United States Natural Gas Fund (NYSE: UNG) jumped 2.2% on volume that was nearly double the daily average. The First Trust ISE-Revere Natural Gas Index Fun (NYSE: FCG) surged 3.6% on volume that was roughly 50% above the daily average.