Oil prices rose sharply Thursday on hopes that the economies of the U.S. and Europe could recover and avoid another recession. Jobless claims fell and factory orders rose in the U.S., and a key interest rate was cut in Europe.
In New York benchmark crude rose $1.56 to end the day at $94.07 per barrel. Brent crude rose $1.49 to finish at $110.83 a barrel in London.
Oil prices and stock markets also rose on news that a plan to tackle the European debt crisis might not be put to a vote in Greece that could scuttle the deal.
"This market just lives on the latest headlines coming out of Europe," said Stephen Schork, an independent oil analyst and trader.
In a move that surprised markets, the European Central Bank cut its benchmark interest rate to 1.25 percent from 1.5 percent. The aim is to keep European economies from falling into recession. Low interest rates make it cheaper for businesses to borrow money to invest in new factories, materials, technology and jobs.
The Labor Department reported that the number of people who applied for unemployment benefits dipped slightly last week. Applications fell by 9,000 to 397,000. That's the lowest level in five weeks. And the Commerce Department said factory orders rose in September. A key category that tracks business investment had the biggest jump in six months.
When economies grow, demand for gasoline, diesel and jet fuel rises as people travel more and businesses ship more goods.
Still, analysts say oil demand has not yet picked up, and oil producers are easily keeping up with global oil demand that is turning out to be less than originally expected for the year. Even demand in China, which has been rising sharply and pushing oil prices higher in recent months, has shown signs of weakening.
This suggests oil prices should be lower. But in recent weeks, oil prices have tracked stock markets closely and risen sharply with them. The price of crude has risen more than $15 per barrel, or 19 percent, since the beginning of the month.
"It's hard to explain because it doesn't make sense on a fundamental basis," said Addison Armstrong, a senior director for market research at Tradition Energy. "The fundamentals aren't particularly bullish."
Armstrong says that despite this, Thursday's sharp rise in oil prices could mean they are poised to rise even further, toward $100 per barrel — if stock investors continue to feel good about the U.S. and European economies.
The national average retail price of gasoline fell about half a cent to $3.426 per gallon on Thursday, according to AAA, Wright Express, and Oil Price Information Service. Retail gasoline prices are expected to rise in coming days, reflecting Thursday's jump in crude prices.
In other energy trading in New York, heating oil rose 3.74 cents to end at $3.0381 per gallon, wholesale gasoline fell 1.46 cents to $2.6418 per gallon and natural gas rose 3 cents to $3.7780 per thousand cubic feet.
Jonathan Fahey can be reached at http://twitter.com/JonathanFahey
Copyright 2011 The Associated Press.