In this Nov. 13, 2009 file photo, an oil pump works in the Persian Gulf desert field of Sakhir, Bahrain. THE CANADIAN PRESS/AP, Hasan Jamali
June 29, 2012 - 11:11 AM
NEW YORK, N.Y. - The price of oil soared Friday after European leaders took unexpectedly aggressive steps to support the region's beleaguered banking sector.
Benchmark West Texas Intermediate crude jumped by $4.49, or 5.8 per cent, in morning trading to US$82.18 a barrel in New York. Brent crude rose by $4.15, or 4.5 per cent, to US$95.51 a barrel in London. A day earlier, oil had hit its lowest level since early October.
Oil surged after eurozone leaders agreed to pump bailout money directly into banks instead of onto the balance sheets of already stressed governments. The decision eased fears of widespread European bank failures that could have hampered lending in other parts of the world.
The measures were a breakthrough for Europe, whose leaders have repeatedly clashed over how to deal with hefty government debts. The deal was struck as borrowing rates in Spain and Italy surged to levels that were considered unsustainable.
The debt crisis has loomed over stock and energy markets for almost two months.
"All of a sudden we're not worried about the Spanish and Italian banks going bankrupt over the weekend," said Phil Flynn, an oil analyst with Price Group.
Elsewhere, European countries prepared to stop buying Iranian oil starting Sunday in an effort to pressure the country to open its nuclear facilities to inspection.
International sanctions already have cut Iranian exports by about 700,000 barrels a day. Experts said it's unclear how much more of Iran's oil will be taken off the market due once the embargo goes into effect. A further reduction in global supply could increase prices for the remaining oil.
In other futures trading, heating oil added 10.52 cents to US$2.6571 a U.S. gallon (3.79 litres) and wholesale gasoline added 7.38 cents to US$2.688 a gallon. Natural gas rose by 3.9 cents to US$2.761 per 1,000 cubic feet.
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News from © The Associated Press, 2012