NEW YORK (Reuters) - Oil rose by more than $2 a barrel on Tuesday, rallying for a second time in three days, after data showing the fastest rate of U.S. economic growth in 11 years bolstered expectations for crude demand.
Crude markets pared gains after preliminary data from industry group American Petroleum Institute showed a build of more than 5 million barrels in U.S. crude stockpiles last week versus expectations for a drop. The U.S. Energy Information Administration will release official inventory data at 10:30 a.m. ET on Wednesday. [API/S][EIA/S]
After a brief decline in early New York trade, oil resumed an upward trend seen during its Asian and London hours, with daily gain accelerating to nearly 3 percent after release of stronger-than-expected U.S. gross domestic product data.
"I was kind of surprised that we rose that much, though the GDP data was good, as fundamentally, nothing has changed much in the oil supply situation," said Joseph Posillico, senior vice president of energy futures at Jefferies in New York.
"We're likely to see more of these sort of exaggerated moves over the next week due to the thinner trading volumes around the holidays."
The Commerce Department revised its estimate of U.S. economic growth in the third quarter to a 5.0 percent annual pace from 3.9 percent previously. It was the fastest growth pace since the third quarter of 2003.
Traders, betting oil prices had bottomed somewhat after last Thursday's 5-1/2 year lows, pounced on the GDP data and ensuing rally in U.S. equity markets to push up prices of both benchmark Brent oil and U.S. crude.
Brent LCOc1 settled up $1.58 at $61.69 a barrel, continuing its rise in post settlement to $62.14.
Brent has almost halved in value over the past six months as high quality crude from North America overwhelmed demand. It hit 5-1/2 year lows of $58.50 last week.
U.S. crude CLc1 finished the session up $1.86 at $57.12, and rose thereafter to as high as $57.56.
After the API data, both Brent and U.S. crude pared about 50 cents in gains.
Some analysts say Brent's apparent floor at near $60 is an illusion as a much deeper sell-off is on the cards technically.
Arab producers in OPEC expect oil to rebound to between $70 and $80 by the end of next year as a global economic recovery revives demand, OPEC delegates told Reuters this week.
Additional reporting by Christopher Johnson and Henning Gloystein in Singapore; Editing by William Hardy, W Simon and David; Gregorio