Oil prices rise after European banks deal

Oil prices jumped 3 percent Monday as fears of another recession retreated.

Prices rose after France and Germany agreed to put more capital into European banks. The move by the eurozone's two biggest nations helped ease concerns that major banks in Europe and elsewhere would be brought down by the region's debt crisis.

Benchmark crude rose $2.43, or 3 percent, to end the day at $85.41 per barrel in New York. Brent crude, which is used to price many international kinds of oil, rose $3.07 to finish at $108.95 in London.

Economists had started to cut oil price and demand forecasts after the U.S. and European economies stalled in the third quarter. Now actions by European leaders to prop up ailing banks, and encouraging economic news in the U.S. have brought oil prices back from 12-month lows.

Analysts say they're more confident that there won't be another recession, and that means world oil demand should continue to increase. "While the economy won't be growing that fast," PFGBest analyst Phil Flynn said, "it's still growing."

World oil demand is still expected to hit a record of about 88 million barrels per day this year, as China, India and other developing nations continue to expand. -- AP