Oil prices top $85 a barrel
Oil prices rebound on positive moves from Europe after dipping to 12-month lows. Lower oil prices had caused US gasoline prices to drop 27 cents in a month.
Oil prices jumped 3 percent Monday as fears of another recession retreated.
Prices rose Monday after France and Germany agreed to put more capital into European banks. The move by the eurozone's two biggest nations helped ease concerns that major banks in Europe and elsewhere would be brought down by the region's debt crisis.
Benchmark crude rose $2.43, or 3 percent, to end the day at $85.41 per barrel in New York. Brent crude, which is used to price many international kinds of oil, rose $3.07 to finish at $108.95 in London.
Economists had started to cut oil price and demand forecasts after the U.S. and European economies stalled in the third quarter. Now actions by European leaders to prop up ailing banks and encouraging economic news in the U.S. have brought oil prices back from 12-month lows.
Analysts say they're more confident that there won't be another recession, and that means world oil demand should continue to grow.
"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.
Despite sluggish economic growth in the U.S. and Europe, world oil demand is still expected to hit a record of about 88 million barrels per day this year. Demand is growing as China, India and other developing nations continue to expand.
While the U.S. may avoid another recession, rising oil prices could keep retail gasoline prices from sinking as low as some thought they might 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 4.51 cents to end at $2.9039 per gallon and gasoline futures rose 4.77 cents to finish at $2.6953 per gallon. Natural gas futures rose by 6 cents to end at $3.541 per 1,000 cubic feet.