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Oil rose more than 3 percent Thursday after news that the U.S. economy returned to growth in the third quarter, reviving expectations of an increase in fuel consumption.
US light, sweet crude [US@CL.1 Loading... ()] rose $2.41 to settle at $79.87. London Brent crude [GB@IB.1 Loading... ()] also gained.
Third-quarter U.S. gross domestic product grew at a rate of 3.5 percent, beating analysts' expectations for 3.3 percent growth.
In another sign that demand in the world's largest fuel consumer could rise, the number of U.S. workers filing new claims for jobless benefits dipped by 1,000 last week.
"Oil futures are up sharply on the GDP data, on optimism that economic conditions will improve and raise demand for petroleum products," said Andy Lebow, broker at MF Global in New York.
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Higher equities and a weaker dollar have pushed crude prices higher in recent months as investors look to wider macro economic data for signs of economic recovery and a potential rise in energy demand.
Crude prices have more than doubled since the turn of the year. However, prices remain far off the peak near $150 a barrel hit in July 2008, when booming demand from powerhouses like China sparked fears supplies may struggle to keep up.
Eyes Still on Weak Dollar
Weakness in the U.S. dollar has been supporting commodity prices as investors turn to hard assets as a hedge against inflation. Dollar-priced commodities also become cheaper for holders of other currencies.
The dollar weakened against the euro Thursday, adding to four days of losses.
"Right now, we're in an environment which is a global market," said Michael Lewis, Deutsche Bank's head of commodity research. "You don't have diversification any more between equities, crude oil and the dollar."
This scenario has sheltered the oil market from the weak fundamentals of over-supply and slack demand. On Wednesday, official weekly U.S. oil data showed a sharp increase in gasoline inventories and a slight rise in crude stocks. Total oil product demand dropped by about 3 percent from a year earlier.
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