Oil prices rally; Brent up almost $3

LONDON—Oil prices rallied on Thursday in line with stock markets and the euro after top central banks said they would provide dollars to cash-squeezed markets.

Traders also reacted to an announcement by the International Energy Agency, which said it had ended its release of oil from strategic reserves begun in June for its 28 member countries owing to a cut in Libyan supplies.

Brent North Sea crude for delivery in October jumped $2.78 to $115.18 a barrel in late London deals.

New York’s main contract, light sweet crude for delivery in October, climbed 75 cents to $89.66.

US banking titan Goldman Sachs on Thursday forecast that crude should hit about $130 a barrel within a year as strong Asian demand offsets an economic slowdown in the West.

Amid global financial strains, leading central banks have decided on joint action to provide banks with extra dollar liquidity, the European Central Bank said.

“The governing council of the European Central Bank (ECB) has decided, in coordination with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank, to conduct three US dollar liquidity-providing operations with a maturity of approximately three months covering the end of the year,” the ECB said in a statement.

“These operations will be conducted in addition to the ongoing weekly seven-day operations announced in May 2010.”

Some European banks have run into serious problems in borrowing dollars because US funds, which usually lend to them, have withdrawn on concerns that contagion from the eurozone debt crisis could weaken banks.

The announcement weighed on the greenback, making dollar-denominated oil cheaper for holders of the euro, pushing up demand for crude on Thursday.