Oil climbs 3% on GDP growth

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NEW YORK (Reuters) -- Oil rose nearly $3 to top $80 a barrel Thursday after news that the U.S. economy returned to growth in the third quarter, reviving expectations of an increase in fuel consumption.

U.S. crude oil futures rose $2.41, or 3.11%, and settled at $79.87 a barrel.

Third-quarter U.S. gross domestic product grew at a rate of 3.5%, beating analysts' expectations for 3.3% growth.

"Oil futures are up sharply on the GDP data, on optimism that economic conditions will improve and raise demand for petroleum products," said Andy Lebow, broker at MF Global in New York.

Wall Street also rose Thursday, as corporate earnings topped expectations.

Higher equities and a weaker dollar have pushed crude prices higher in recent months as investors look to wider macro economic data for signs of economic recovery and a potential rise in energy demand.

Crude prices have more than doubled since the turn of the year. However, prices remain far off the peak near $150 a barrel hit in July 2008, when booming demand from powerhouses like China sparked fears supplies may struggle to keep up.

Weakness in the U.S. dollar has been supporting commodity prices as investors turn to hard assets as a hedge against inflation. Dollar-priced commodities also become cheaper for holders of other currencies.

The dollar weakened against the euro Thursday, snapping four days of gains.

"Right now, we're in an environment which is a global market," said Michael Lewis, Deutsche Bank's head of commodity research. "You don't have diversification any more between equities, crude oil and the dollar."

This scenario has sheltered the oil market from the weak fundamentals of over-supply and slack demand. On Wednesday, official weekly U.S. oil data showed a sharp increase in gasoline inventories and a slight rise in crude stocks. Total oil product demand dropped by about 3% from a year earlier.