BUSINESS
11/10/2011 09:48 EST | Updated 01/23/2014 06:58 EST

Oil above $97 as weaker US dollar, lower oil inventories trump Italy debt woes

NEW YORK, N.Y. - Oil prices jumped more than two per cent Thursday as investors cheered political shake-ups in Greece and Italy, and layoffs appeared to be easing in the U.S.

Benchmark crude rose US$2.04, or 2.1 per cent, to finish at $97.78 per barrel in New York. Brent crude rose $1.40 to end at $113.71 a barrel in London.

Greece and Italy turned to economists to lead them out of their debt crises. Greece chose Lucas Papademos as prime minister. In Italy, Mario Monti received increasing support to replace outgoing Prime Minister Silvio Berlusconi.

Those countries continue to face massive financial hurdles, but the leadership changes were taken as a sign that Italy and Greece are serious about reducing their debts. A default in either country would be devastating for the world economy, possibly leading to bank failures, a drop in spending and weaker oil demand elsewhere.

Investors were also encouraged to see that Italy could still raise money by selling nearly $7 billion in 12-month bonds. The interest rate was well below analysts' expectations, implying stronger-than-expected confidence in the Italian economy.

"Their economy still has a lot of problems, but that bond sale showed it's not as bad as feared," PFGBest analyst Phil Flynn said.

There was also some upbeat economic news in the U.S. on Thursday. The U.S. Labour Department said that the number of people applying for jobless benefits fell last week to 390,000 — the lowest level since April.

At the pump, retail gasoline prices rose nearly a penny to $3.439 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is about 55 cents cheaper than its peak price in May, but it's still almost 58 cents higher than a year ago.

In Canada, the price at the pump averaged C$1.22 per litre, according to price-watching website GasBuddy.com.

In other energy trading, heating oil rose 5.25 cents to finish at US$3.1511 per gallon, while gasoline futures fell less than a penny to end at $2.6368 per gallon. Natural gas finished virtually unchanged at $3.65 per 1,000 cubic feet.