Oil prices rebounded sharply Wednesday after weeks of being knocked down by economic uncertainty.
After dropping more than 20 percent in three weeks, oil rallied 4 percent, the best one-day percentage gain since September 30. Consumers, meanwhile, continue to benefit from declining prices at the pump.
Investors chose to focus on positive U.S. economic news instead of troubles in Europe. Government reports said demand increased for both gasoline and big-ticket goods like refrigerators and airplanes. Many investors now think oil is undervalued and a rally in equities markets sparked a parallel rally in crude, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
"I'm not saying the correction is over" in energy commodities, Kloza said. "But people are now saying, 'I can live with these prices'."
Oil held its gains even as U.S. stock markets turned lower. Benchmark crude for July delivery added $2.76 to settle at $71.51 a barrel on the New York Mercantile Exchange. The price was $86.84 on April 6. In London, the Brent crude rose $2.19 to settle at $71.74 a barrel on the ICE futures exchange.
The benchmark oil contract was pushed higher early in the day by rising international stock markets.
Prices kept rising as the Commerce Department reported that orders for durable goods increased 2.9 percent in April, the best showing in three months. The report suggested that the U.S. manufacturing industry was getting stronger, which could lead to more fuel consumption.
Oil also jumped after the Energy Information Administration said U.S. gasoline supplies dropped unexpectedly last week. Gasoline stockpiles shrank by 200,000 barrels while demand grew compared with last year. The EIA also reported that oil supplies rose more than expected.
At the pump, retail gas prices continued to slide. The national average slipped nearly a penny overnight to $2.771 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded costs 8.3 cents less than a month ago. Gasoline is now cheaper than it was at this time of year in 2006, 2007 and 2008. It's still 34.6 cents more expensive than it was a year ago.
Meanwhile, European countries are pushing ahead with plans to ease massive government debt. Italy passed $30 billion in budget cuts for the 2011-2012 period while Greece is considering selling an array of state assets to raise much-needed cash.
The debt crisis in Europe has lowered expectations for the global economy. Bank of America Merrill Lynch cut its forecast for the average oil price in the second half to $78 a barrel from $92, reflecting sharply reduced forecasts for the developed world. It still expects growth to come from Asia.
In other Nymex trading in June contracts, heating oil rose 4.9 cents to settle at $1.9207 a gallon, and gasoline gained 3.96 cents to settle at $1.9704 a gallon. Natural gas jumped 10.4 cents to settle at $4.155 per 1,000 cubic feet.
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