Oil up on stronger-than-expected U.S. GDP growth data

By Barani Krishnan

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 prices were also supported by forecasts showing a drop of more than 2 million barrels in U.S. crude stockpiles last week. The American Petroleum Institute, an industry group, will release at 4:30 p.m. ET (2130 GMT) preliminary inventory data for the week ended Dec. 19.

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.

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 strong GDP data and rally in U.S. stock markets to push both benchmark Brent and U.S. crude higher amid lighter-than-usual pre-holiday volumes.

Brent 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 finished the session up $1.86 at $57.12, and rose thereafter to $57.56.

"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 thinner trading volumes."

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)