* Oil price turns around, surges $5 and lifts energy group
* Oilexco top loser and most traded; unit faces insolvency
* Labopharm up 38 pct; FDA approves pain drug Ryzolt
* RIM up 6 pct, biggest gainer on the index (Updates to midafternoon numbers)
TORONTO, Dec 31 (Reuters) - Toronto's main stock index jumped more than 1 percent on Wednesday afternoon as the price of oil surged, boosting the heavily weighted energy sector.
The price of crude oil spiked more than $5 in volatile trading, helping to lift the oil and gas sector to join the rest of the broadly higher sectors on the benchmark TSX.
The Toronto Stock Exchange's oil and gas group was up 1.6 percent as the price of crude drove above $44 a barrel.
At 2:40 p.m. (1940 GMT), the S&P/TSX composite index .GSPTSE was up 1.7 percent, or 148.96 points, at 8,979.68. Still, the TSX is now on track to make a third straight day of triple-digit gains, and may finish its roller-coaster year on a high note.
But the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE is still down about 35 percent this year.
All 10 of the index's main groups were higher on Wednesday, with eight groups posting gains of better than 1 percent. The materials group was able to shrug off early weakness brought on by softer gold prices, and vaulted into positive territory when the precious metal rallied late in the afternoon.
Research in Motion RIM.TO, frequently a volatile stock, added about 6 percent to C$50.19 and was the biggest gainer on the index.
The health of the global economy is at the forefront of the market's focus heading into 2009. Market observers are looking ahead to reduced turbulence from the financial crisis and many hope the economy will bounce back in the second half.
"The economic numbers will be worse, but the market numbers will start to look a lot better," said Andrew Pyle, wealth advisor at ScotiaMcLeod in Peterborough, Ontario, pointing to hopes of improved credit markets, the effect of a new U.S. administration, and less volatility overall.
"It's not out of the question to see the TSX putting on 20 percent in the first six months of the year. The trick will be what happens when we get to these thresholds," Pyle said.
"That will be the interesting feature of 2009: whether investors will take the money and run or stay with the market."
In company news, Labopharm DDS.TO was up 38 percent to C$2.25 after it said it won its first U.S. regulatory approval for the once-daily chronic pain drug Ryzolt. [ID:nN31303720]
Oilexco OIL.TO was the most traded stock and biggest percentage loss leader, down 65 percent at 31 Canadian cents, as the oil and gas exploration company said its British unit faced insolvency. [ID:nLV536038] (Reporting by Ka Yan Ng; editing by Rob Wilson)