Oil prices rose 4.5 percent Tuesday on hopes that European leaders are closer to drafting a plan to contain the region’s debt crisis.
Investors are encouraged that another recession can be avoided and demand for energy products — from oil to diesel and gasoline — will improve if Greece does not default on its debt. Greece’s finance minister expects his country to receive the next round of bailout loans in time to avoid a default. German Chancellor Angela Merkel said that her country will do whatever it can to help Greece regain investor confidence.
Benchmark oil rose $3.64, or 4.5 percent, to $83.88 per barrel in midday trading in New York. Brent crude, which is used to price international varieties of oil, increased $2.72 to $106.66 per barrel in London.
Stocks and commodities rose on the improving international picture. Gold broke a three-day slump and rose more than 4 percent. The Dow Jones industrial average, the Standard & Poor’s 500 index and the Nasdaq composite all rose more than 2 percent.
Crude oil has fallen about 12 percent since July 1 and is down 27 percent since hitting a high for the year of $113.93 per barrel on April 29.
“Worries about the economy are what drove prices down, and if things are going to stabilize and look more positive, then the belief is that demand is going to recover,” said Tom Bentz, an analyst at BNP Paribas Commodity Futures. “We just follow what the economy is doing these days.”
Andrew Lebow, MF Global senior vice president, said oil could start to fall again on any negative sign about the economy. “It’s hard to say that this is really on very firm footing,” he said.
The drop in oil prices has helped drivers. Gas prices fell just over a penny to a national average of $3.48 per gallon on Tuesday, according to a survey by AAA, Wright Express and the Oil Price Information Service. That’s 10 cents lower than just a week ago.
In other energy trading, heating oil rose 8 cents, or 2.7 percent, to $2.8793 per gallon, gasoline futures rose 10 cents, or 4 percent, to $2.6285 per gallon and natural gas was up 2 cents at $3.863 per 1,000 cubic feet.