NEW YORK ? Oil jumped to the highest level in more than a week alongside a broad rally on Wall Street and a report that Japan's economy contracted less than feared in the months after the earthquake and tsunami in March.
Monday's 2.6 percent rise, to more than $87 per barrel, all but erased losses from a roller coaster ride in oil markets last week. The benchmark price tumbled last Tuesday to its lowest level this year, though its current trading range of between $80 and $90 per barrel is still well above last year's average of $79.64 per barrel.
That means gasoline pump prices should remain higher than last year's levels. The national average fell less than a penny on Monday to $3.594 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 8 cents cheaper than it was a month ago, but it's still about 84 cents higher than it was last year.
Oil fell last week after a downgrade of the U.S. credit rating by S&P sparked the most volatile week on Wall Street since November 2008. Then crude moved sharply higher following positive jobs news in the U.S. and an announcement by the Federal Reserve that it will keep lending rates low.
Crude kept rising Monday after Japan said its economy shrank at an annualized rate of 1.3 percent in the April-June quarter. That's about half the decline that analysts expected.
"Last week, we saw a market that was really driven by fear," PFGBest Phil Flynn said. "The data out of Japan shows that the world isn't falling off the map."
Oil also was propped up by a weaker dollar. Oil is priced in U.S. currency, and it tends to rise when the greenback falls and makes crude less expensive for investors holding foreign money. On Monday the dollar sank and oil rose after the government reported that foreign investors cut their holdings of U.S. currency in June. The 0.4 percent decline happened when lawmakers were still fighting over a deal to increase the nation's borrowing limit.
A wave of acquisition announcements worth $19 billion bolstered investor optimism. The Standard & Poor's 500 index, the Nasdaq and the Dow Jones industrial average were all up more than 1 percent in afternoon trading.
Benchmark West Texas Intermediate crude for September delivery surged $2.26 to $87.64 per barrel on the New York Mercantile Exchange. That's the highest since Aug. 5.
Brent crude, which is used to price many international oil varieties, added 98 cents at $109.01 per barrel on the ICE Futures exchange in London.
In other Nymex trading for September contracts, heating oil added about 3 cents at $2.9341 per gallon and gasoline futures gained around 3 cents at $2.8548 per gallon. Natural gas lost 2 cents at $4.044 per 1,000 cubic feet.
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Chris Kahn can be reached at www.twitter.com/ChrisKahnAP.
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