Oil prices jumped nearly 3 percent Wednesday, riding a rally on Wall Street and a government report that said demand grew for big-ticket goods like refrigerators and airplanes.
Benchmark crude for July delivery added $2.05 at $70.80 a barrel on the New York Mercantile Exchange. In London, the Brent crude rose $1.65 to $71.20 on the ICE futures exchange.
Oil prices have plunged in recent weeks, shedding nearly 21 percent in value since cresting at $86.84 in April. As Wall Street rebounded, investors started putting more money into oil, 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'."
The benchmark oil contract was pushed higher early in the day by a rally in international stock markets.
The Dow Jones industrial average gained about 60 points in midday trading but was off its highs of the day. Trading has been volatile since major indexes hit their highs for the year a month ago.
In midday trading, the Dow rose 59.10, or 0.6 percent, to 10,102.85. It had been up as much as 135 points.
The broader Standard & Poor's 500 index rose 8.26, or 0.8 percent, to 1,082.29. The Nasdaq composite index rose 24.26, or 1.1 percent, to 2,235.21.
Treasury prices fell, driving up yields. The yield on the benchmark 10-year Treasury note rose to 3.23 percent from 3.16 percent late Tuesday.
Meanwhile, oil 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, saying that it has sharply reduced its forecasts for the developed world and expects growth to come from Asia.
In other Nymex trading in June contracts, heating oil rose 3.98 cents to $1.9115 a gallon, and gasoline gained 3.06 cents at $1.9614 a gallon. Natural gas jumped 10.8 cents to $4.159 per 1,000 cubic feet.
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