Oil jumped to above US$80 a barrel Friday, bouncing off an eight-month low after European leaders agreed to use the continent's bailout fund to funnel money directly to struggling banks.
By early afternoon in Europe, benchmark oil for August delivery was up $2.81 at $80.50 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.52 to settle at $77.69, the lowest close since October, in New York on Thursday.
In London, Brent crude for August delivery was up $1.40 at $92.76 per barrel on the ICE Futures exchange.
Policymakers said at an EU summit early Friday that they would create a unified bank supervisory board and allow a rescue fund to recapitalize Spain's banks without boosting government debt.
Before the summit, analysts hadn't expected any significant policy announcements, so investors reacted with optimism Friday that the EU may be taking steps toward solving its debt and economic woes.
"The outcome of the EU summit has sparked a noticeable recovery among oil prices," said a report from Commerzbank in Frankfurt.
Stock markets in Europe and Asia rose and the euro jumped to $1.2579 from $1.2429 late Thursday in New York. Oil traders often look to stock markets as a barometer of overall investor sentiment. A weaker US dollar makes commodities traded in dollars such as crude less expensive for investors with other currencies.
Also supporting oil prices was an ongoing strike in Norway's oil industry. Labor unions expect the strike to continue for weeks, which could affect the country's oil exports, the fifth-largest in the world.
"The resulting production outages ... amount to 290 thousand barrels per day, equivalent to nearly a fifth of Norwegian oil production," Commerzbank said.
Crude has plunged from $106 early last month amid expectations that weak global economic growth will reduce demand for oil.
In other energy trading, heating oil was up 6.11 cents at $2.6083 per gallon and gasoline futures gained 4.84 cents at $2.5257 per gallon. Natural gas added 4.8 cents at $2.77 per 1,000 cubic feet. (mtq)