NEW YORK (AP) — The price of oil rose the most in three weeks amid signs that the U.S. economy is improving, but not fast enough for the Federal Reserve to reduce its monthly bond-buying program.
Still, many analysts don't expect a further spike in oil prices like the one seen earlier in July.
Benchmark oil gained $1.95, or 1.9 percent, to close at $105.03 per barrel on the New York Mercantile Exchange. That's the biggest one-day gain since oil rose $2.99 on July 10.
Traders were encouraged by two economic reports. The government said the economy grew at a better-than-expected annual rate of 1.7 percent in the second quarter. And a survey from payroll company ADP showed U.S. businesses created a healthy 200,000 jobs this month. The reports signal the possibility of improved demand for gasoline and other refined products such as diesel fuel.
Gasoline futures rose 3 cents to finish at $3.04 per gallon.
In the afternoon, the Federal Reserve slightly downgraded its assessment of economic growth from "moderate" to "modest." That's an indication the Fed might need to maintain its $85 billion a month in bond purchases, which have helped keep long-term borrowing rates ultra-low and boosted purchases of riskier investments such as stocks and oil futures.
The Fed statement boosted the price of oil above $105. Oil finished the month of July with a gain of $8.47 a barrel, or 8.8 percent. That helped increase the cost of driving. Average gasoline prices rose 14 cents this month, to $3.63 a gallon Wednesday from $3.49 on July 1. AAA said it was the biggest monthly increase since February.
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