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Oil soars as Europe moves to bolster banks

Benchmark US crude jumped by $4.49, or 5.8 per cent, on Friday to $82.18 per barrel in New York while Brent crude rose by $4.15, or 4.5 percent, to $95.51 per barrel in London. A day earlier, oil hit its lowest level since early October.

The price of oil soared after European leaders took unexpectedly aggressive steps to support the region's beleaguered banking sector.

Benchmark US crude jumped by $4.49, or 5.8 per cent, on Friday to $82.18 per barrel in New York while Brent crude rose by $4.15, or 4.5 percent, to $95.51 per barrel in London. A day earlier, oil hit its lowest level since early October.

Major stock markets also jumped nearly 2 per cent in morning trading.

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 nations prepared to stop buying Iranian oil starting from Sunday in an effort to pressure the country to open its nuclear facilities to inspection. Western nations fear that Iran is building a nuclear weapon; Iran denies the claim.

International sanctions already have cut Iranian exports by about 700,000 barrels per 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.

Meanwhile, retail gasoline prices fell to $3.353 per gallon in the U.S., the lowest since Jan. 6, according to auto club AAA, Wright Express and Oil Price Information Service.