Oil prices jumped to above $92 a barrel Thursday after European leaders agreed on a plan to reduce Greece's debt burden.
By early afternoon in Europe, benchmark crude for December delivery was up $2.19 at $92.39 a barrel in electronic trading on the New York Mercantile Exchange.
The contract had fallen $2.97, or 3.2 percent, to settle at $90.20 in New York on Wednesday.
In London, Brent crude was up $1.93 at $110.84 a barrel on the ICE Futures exchange.
EU President Herman Van Rompuy said early Thursday that policymakers struck a deal that will reduce Greece's debt to 120 percent of its GDP in 2020. The plan calls on banks to accept 50 percent losses on their Greek bonds.
Van Rompuy also said nations that use the euro common currency and the International Monetary Fund will give Greece another euro100 billion ($140 billion).
Investors cheered the accord as a first step toward containing Europe's sovereign debt crisis. The Dow Jones industrial average gained 1.4 percent on Wednesday, and stock markets in Asia and Europe rose Thursday.
"This could be a turning point for the eurozone debt crisis," said Victor Shum, an analyst with energy consultancy Purvin & Gertz in Singapore. "It's a significant development that private investors have agreed to take a 50 percent haircut on Greece."
Crude has jumped over 20 percent from $75 on Oct. 4 amid growing investor optimism that the U.S. economy will avoid a recession this year. Shum said he expects oil to trade near $100 by the end of the year.
The debt agreement also helped boost crude prices by strengthening the euro against the dollar. A weaker dollar makes oil less expensive for investors using other currencies.
The euro was up at $1.4029 from $1.3908 late Wednesday in New York, while the dollar fell to 75.86 yen from 76.20 yen.
Others were less convinced by the long-term sustainability of the EU debt deal.
"The outlook for Greece remains dreary ... and the high risk that other European countries like Italy will run into greater troubles is likely to keep investment sentiment muted," said a report from JBC Energy in Vienna.
In other Nymex trading, heating oil rose 2.8 cents to $3.05 per gallon and gasoline futures gained 3.9 cents at $2.66 a gallon. Natural gas fell 1.0 cents at $3.58 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.
Copyright 2011 The Associated Press.