Oil rebounded Wednesday from 12-month lows on signs that financial leaders will move to bolster struggling European banks and on positive U.S. economic news.
Benchmark crude jumped $4.01, or 5.3 percent, to finish at $79.68 per barrel in New York, while Brent crude rose $2.94, or 3 percent to end at $102.73 in London.
Prices earlier in the week dropped to the lowest level since September 2010 as Europe's financial crisis festered. Greece warned that it would run out of money in November, and a future bailout was in doubt since it failed to meet spending targets.
There was news Wednesday that the International Monetary Fund is pushing for changes in the way Europe's debt crisis is handled. The pressure from the IMF and word of a possible plan to recapitalize troubled banks encouraged investors and traders, who have kept a wary eye on Europe as several countries wrestle with debt problems. Massive spending cuts throughout the eurozone would depress energy demand in the region, and experts are concerned that if Greece fails to pay its bills, it will spark a financial meltdown similar to the U.S. banking crisis of 2008.
"Nobody knows whether Europe is on the cusp of a (meltdown) or something that's much more minor," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Payroll company ADP reported that the private sector created more jobs than expected in September. That bodes well for the government's monthly jobless report, due on Friday.
A private research firm also said hotels, restaurants and other parts of the service industry expanded in September — but at a slightly slower pace than the previous month — suggesting that the economy continues to grow.
Oil prices got a boost from an Energy Department report Wednesday that showed crude and gasoline supplies dropped unexpectedly last week. Supplies shrank mostly on the Gulf Coast, as refineries reduced capacity and cut back on crude imports.
At the pump, gasoline prices lost nearly a penny for a new national average of $3.3989 per gallon, according to AAA, Wright Express and Oil Price Information Service. The national average has dropped almost every day for a month, and analysts say it could fall as low as $3.25 per gallon this winter.
Drivers are expected to pay more on average this year than ever before. The average price per gallon is $3.56 so far this year, up from a 2010 average of $2.78.
In other energy commodities trading, heating oil rose 5.32 cents to finish at $2.7766 per gallon and gasoline futures rose 8.08 cents to end at $2.5692 per gallon. Natural gas lost 6.8 cents to finish the day at $3.5700 per 1,000 cubic feet.
Copyright 2011 The Associated Press.