Oil prices rallied for a second day on Thursday as investors set aside worries for now about the European debt crisis and focused on rising stock markets and improving economic data.
Retail gasoline prices continued to slide, as three weeks of declining oil prices slowly made their way to the pump.
Benchmark crude for July delivery rose $3.04, or about 4 percent, to settle at $74.55 a barrel on the New York Mercantile Exchange.
Earlier this month crude prices were as high as $87.15 a barrel, before they were dragged down by worries that Europe's debt crisis could undermine the global economic recovery. The battered euro gained some strength against the dollar on Thursday. Oil is priced in dollars, so a stronger dollar makes it less appealing to holders of foreign currencies.
Some analysts think that oil was due to bounce back because it dropped so quickly. "Because the market was beaten down so fast it doesn't take that much to prop it up a little bit," PFGBest analyst Phil Flynn said.
Oil prices benefited as stocks rose on encouraging economic news. The Dow Jones Industrial Average was up about 230 points, or 2.3 percent, in afternoon trading. The NASDAQ was over 3 percent higher, and the S&P 500 was up more than 2.7 percent.
The government said Thursday that the U.S. economy grew at a 3 percent annual rate in the first quarter, albeit slower than initially thought. That came a day after strong reports on factory orders, housing and consumer confidence.
Natural gas prices rose again, even though the amount of gas in storage grew. The Energy Information Administration reported that the natural gas inventory is now 17 percent above the five-year average. Prices have been rising since Monday and settled 11.5 cents higher at $4.294 per 1,000 cubic feet.
Drivers heading out for a Memorial Day weekend trip will enjoy cheaper gasoline prices, as pump prices keep falling. Prices dropped 1.2 cents to a national average of $2.759 per gallon on Thursday, according to AAA, Wright Express and Oil Price Information Service.
Prices have lost 8.1 cents in the past week and 9.9 cents in a month. They are 32.5 cents above year-ago prices.
So far, the spill in the Gulf of Mexico has yet to affect oil and gasoline prices even though it has surpassed the Exxon Valdez spill as the worst in U.S. history. The Coast Guard and BP said the latest attempt to stop crude from gushing out of the seabed seemed to be working.
In other Nymex trading in July contracts, heating oil rose 7.87 cents to settle at $1.9994 a gallon, and gasoline gained $6.85 cents to settle at $2.0389 a gallon.
In London, Brent crude added $2.92 to settle at $74.66 on the ICE futures exchange.
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