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NEW YORK ? Oil prices rebounded sharply Thursday as traders welcomed news that the United States, the world's biggest energy-consuming nation, had returned to economic growth in the third quarter after a year of contraction.
New York's main contract, light sweet crude for December delivery, settled at $79.87 a barrel, a rise of $2.41, or 3.1 percent, from Wednesday's close.
In London, Brent North Sea crude for December leapt $2.18 to close at $78.04.
The market rallied from losses Wednesday after the US government reported gross domestic product (GDP), a broad measure of the country's output of goods and services, posted its strongest economic growth in two years as government stimulus spurred consumer spending.
After four negative quarters, the world's largest economy grew at a seasonally adjusted 3.5 percent annual rate in the July-September period from the second quarter.
It was the strongest expansion since the 2007 third quarter, when a US subprime mortgage crisis triggered a global financial crisis that hammered the world economy, and marked the end of the worst recession since the Great Depression.
"Without any ambiguity one would say that the pretty decent GDP numbers from the previous quarter are to a great extent driving the market," said Bart Melek, analyst at BMO Capital Markets.
"The US economy is moving higher than expected, and interestingly we are seeing decent consumer activity," he added.
Melek said that government stimulus measures had succeeded and "oil demand should pick up as well."
Dollar-priced oil also won support from the weaker greenback.
The euro breached $1.48 on Thursday after the positive US GDP data boosted investor appetite for riskier assets like the single currency.
In afternoon London deals, the European single currency surged as high as $1.4836, up from $1.4714 late on Wednesday.
The US government's first estimate of third-quarter GDP topped the 3.2 percent rate expected by most analysts.
"A broadly strong GDP number indicates that the US economy has finally pulled itself out of recession," said ETX Capital trader Manoj Ladwa.
Oil prices had slumped more than two dollars Wednesday after data showed an increase in US crude and gasoline stockpiles, indicating falling demand.
Mike Fitzpatrick at MF Global also noted the breadth of the US economic rebound in the third quarter and data showing new US weekly claims for unemployment benefits had dipped last week.
"Our thinking is that this is the best evidence, to date, that perhaps a sustainable recovery, and consequently, a revival of energy demand, is starting to take hold," he said.
Nevertheless, Fitzpatrick sounded a cautious note about the government's first official
GDP estimate for the third quarter. Two more readings are due in the coming months.
"A solid recovery will only be characterized by successive positive reports. For oil prices then, the response has been and will probably continue to be somewhat guarded," he said.
"Market participants will need to see meaningful upward momentum in economic performance before they are convinced that demand will follow," he added.
