By PABLO GORONDI
Associated Press Writer
Oil prices rebounded from last week's 14 percent sell-off, rising to $78 a barrel Monday after Europe and the IMF pledged nearly $1 trillion to help defend the embattled euro.
By early afternoon in Europe, benchmark crude for June delivery was up $2.93 to $78.04 a barrel in electronic trading on the New York Mercantile Exchange. The June contract fell $2 to settle at $75.11 on Friday.
The European Union Commission and International Monetary Fund pledged a loan package of euro750 billion ($975 billion) Monday after the euro plunged last week amid investor concerns a debt crisis in Greece could spread to other European countries.
"This positive sentiment should last in the short term and help oil prices to recover further, especially as U.S. labor market data, with a stronger-than-expected rise in jobs, have kindled hopes of a revival of oil demand from the world's largest consumer," said a report from Commerzbank in Frankfurt. "That said, the recovery of prices is merely a technical countermovement to the sharp price losses of the days before. The fundamental data on the oil market still suggest for lower oil prices."
Crude prices are down from an 18-month high of $87.15 a barrel early last week as the debt crisis batteredthe euro, which rallied Monday to $1.2995 from $1.2759.
Commodities priced in dollars, such as oil, become less expensive for investors holding euros as the U.S. currency weakens.
"The EU rescue package has calmed financial markets for now," said Victor Shum, an energy analyst with consultancy Purvin&Gertz in Singapore. "Equities are going up, the dollar is coming down and oil is reacting to that."
Asian and European stocks rose sharply Monday after falling most of last week.
"Last week's drop left oil oversold," Shum said. "We expect prices to creep back above $80, possibly this week."
Analysts said the oil spill in the Gulf of Mexico may start to be "increasingly problematic" for ships using the Mississippi's Southwest Pass, as the spill moves west rather than east.
"If the current trend continues we should not discount the possibility that ships moving up north the Mississippi will soon have to go through the cleaning stations, which would delay the transit times," said Olivier Jakob of Petromatrix in Switzerland.
In other Nymex trading in June contracts, heating oil rose 7.11 cents to $2.1506 a gallon, and gasoline added 6.57 cents to $2.1908 a gallon. Natural gas gained 5.5 cents to $4.070 per 1,000 cubic feet.
In London, Brent crude was up $2.93 to $81.20 on the ICE futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.