10/05/2011 02:32 EDT | Updated 12/04/2011 05:12 EST

Oil nears US$78 a barrel in Asia as hopes of financial fix in Europe send sentiment up

NEW YORK, N.Y. - Oil rebounded Wednesday from 12-month lows on signs that financial leaders will move to bolster struggling European banks and on positive U.S. economic news.

Benchmark crude jumped $4.01, or 5.3 per cent, to finish at US$79.68 per barrel in New York, while Brent crude rose $2.94, or three per cent to end at US$102.73 in London.

Prices earlier in the week dropped to their lowest level since September 2010 as Europe's financial crisis festered. Greece warned that it would run out of money in November, and a future bailout was in doubt since it failed to meet spending targets.

There was news Wednesday that the International Monetary Fund is pushing for changes in the way Europe's debt crisis is handled. The pressure from the IMF and word of a possible plan to recapitalize troubled banks encouraged investors and traders, who have kept a wary eye on Europe as several countries wrestle with debt problems.

Massive spending cuts throughout the eurozone would depress energy demand in the region and experts are concerned that if Greece fails to pay its bills, it will spark a financial meltdown similar to the U.S. banking crisis of 2008.

"Nobody knows whether Europe is on the cusp of a (meltdown) or something that's much more minor," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

Payroll company ADP reported that the U.S. private sector created more jobs than expected in September. That bodes well for the government's monthly jobless report, due Friday.

A private research firm also said hotels, restaurants and other parts of the service industry expanded in September — but at a slightly slower pace than the previous month — suggesting that the economy continues to grow.

Oil prices got a boost from a U.S. Energy Department report Wednesday that showed crude and gasoline supplies dropped unexpectedly last week. Supplies shrank mostly on the Gulf Coast, as refineries reduced capacity and cut back on crude imports.

In other energy commodities trading, heating oil rose 5.32 cents to finish at US$2.7766 a U.S. gallon (3.79 litres) and gasoline futures rose 8.08 cents to end at US$2.5692 a gallon. Natural gas lost 6.8 cents to finish the day at $3.57 per 1,000 cubic feet.