Oil prices jumped more than 3 percent Monday after France and Germany agreed to strengthen Europe's ailing banks.
The move by the eurozone's two biggest nations helped ease concerns about the global economy. Analysts said they're increasingly confident that there won't be another recession, and that means world oil demand should continue to grow.
Benchmark crude rose $2.68, or 3.2 percent, to $85.66 per barrel in New York, and Brent crude increased $3.17 at $109.05 in London.
Prices rose along with a broad rally on Wall Street. The Dow Jones industrial average, the Standard & Poor's 500 index and the Nasdaq composite index each rose more than 2 percent in midday trading. Oil prices have rebounded to the highest level in more than two weeks. Last week they hit a 12-month low.
"Everyone had priced in a recession, and now we're realizing that, while the economy won't be growing that fast, it's still growing," PFGBest analyst Phil Flynn said.
The encouraging news from Europe followed an unexpected increase in U.S. jobs last week, and a report showing that the manufacturing industry grew in September. Over the weekend, French and German leaders said they agreed on a "comprehensive response" to the debt crisis in Europe.
Rising oil prices could keep retail gasoline prices from sinking as low as some expected this year. Pump prices have been falling almost every day since the first week of September. They leveled off on Monday at a national average of $3.395 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has dropped an average of 27 cents since Sept. 5. It's still about 59 cents higher than a year ago.
In other energy trading, heating oil rose 5 cents to $2.9125 per gallon and gasoline futures rose 6 cents to $2.7072 per gallon. Natural gas futures increased by 5 cents to $3.529 per 1,000 cubic feet.
Copyright 2011 The Associated Press.