Crude oil surged to the highest close in 11 weeks as stocks rallied after EBay Inc. and Caterpillar earnings beat estimates and growth accelerated in European manufacturing and services.
Oil climbed 3.6 per cent after the European industries unexpectedly grew at a greater rate last month, signaling fuel demand in the region will gain. Prices also gained as the dollar dropped against the euro, bolstering the appeal of commodities.
"Everyone is focused on the same things, and that is changes in the economic growth outlook," said David Greely, head of energy research at Goldman Sachs Group in New York.
Crude oil for September delivery rose $US2.74 to $US79.30 a barrel on the New York Mercantile Exchange, the highest settlement since May 5. It was the biggest increase since May 27. Futures are up 21 per cent from a year ago.
"We expect to see a breakout above $US80 in the next couple of months," Greely said. "Oil will probably trade in the $US85- to-$95 range during the second half of the year."
A composite index based on a survey of euro-area purchasing managers increased to 56.7 from 56 in June, London-based Markit Economics said today. Economists had projected a drop to 55.5, the median of 18 estimates in a Bloomberg survey.
Members of the European Union accounted for 17 per cent of global oil demand in 2009, according to BP Plc, which publishes its BP Statistical Review of World Energy each June.
Brent crude oil for September settlement rose $US2.45, or 3.3 per cent, to end the session at $US77.82 a barrel on the London- based ICE Futures Europe exchange. It was the highest close since June 25.