NEW YORK: Oil rose on Friday, marking the strongest weekly gains in two months as data showing a rise in business spending lifted markets. A rise in August business spending added to signs of a recovery in the US economy, outweighing a lackluster report on new home sales in August and boosting US stocks.

Oil also was boosted by a surprise rise in Germany's Ifo index of business sentiment US crude for November delivery rose $1.31, or 1.74 per cent, to settle at $76.49 a barrel. For the week, oil rose $2.83, or 3.84 per cent, the biggest per centage rise since oil jumped $2.97, or 3.91 per cent in the week to July 23.

ICE Brent November crude rose 76 cents to settle at $78.87 a barrel on Friday, having traded as high as $79.40. Oil found support this week following comments from the US Federal Reserve, which said on Tuesday it would keep interest rates exceptionally low and that it was prepared to provide additional accommodation if needed to support recovery.

"The increased odds of quantitative easing (by the Fed) adds to the expectation that the dollar will be weaker. The market seems to have priced in the high inventories and weak demand and turned its focus back to the dollar," said Phil Flynn, analyst at PFGBest Research in Chicago.

Under quantitative easing, central banks flood the banking system with masses of money to promote lending. They usually do this when lowering official interest rates no longer is effective because they already are at or near zero. The US economy's recovery from the deepest recession since the 1930s has stalled, with sluggish growth and unemployment remaining stubbornly high, dampening expectations for a recovery in oil demand.

US total petroleum inventories have soared and last week reached their highest since weekly records began in 1990, according to the Energy Information Administration. Since May, crude prices have been hemmed in between the $64.24 intraday low on May 20, the weakest front-month price since July 30, 2009, and the 2010 peak of $87.15 set on May 3.

Oil analysts and brokers also eyed Tropical Storm Matthew in the Caribbean Sea, which may disrupt Mexican infrastructure but on Friday was not expected to threaten US energy operations in the Gulf of Mexico.

SAO PAULO: Brazilian state oil company Petrobras raised $70 billion on Thursday in the world's biggest share offering, giving the company the financial muscle it needs to tap vast offshore oil reserves. The cash will help fund the world's largest oil exploration plan, which at $224 billion for the 2010-2014 period aims to turn Brazil into a major energy exporter.

The Rio de Janeiro-based company sold 1.87 billion new preferred shares at 26.30 reais each, the company said in a regulatory filing. It sold 2.4 billion new common -- or voting -- shares at 29.65 reais each. Uncertainty that the offering might not come off had brought a prolonged sell-off of Petrobras shares that shaved more than $70 billion off its market value. But the optimism displayed by investors seeking exposure to one of the world's largest oil finds in recent decades outweighed worries about growing state involvement in the company's affairs.

"The deal priced at a very tight discount, which is comforting to know because the market expected it to price lower," said Marcio Macedo, who manages about $40 million of stocks for Sao Paulo-based Humaita Investimentos. "After this very successful deal, markets will be in a good tone tomorrow." The deal's 2 percent discount to Thursday's closing price was much smaller than what investors expected, Macedo said.

This year, the preferred shares -- the company's most widely traded class of stock -- slumped 27 percent partly because of worries of mounting state interference as well as uncertainty over the fate of the offering. The record-setting stock sale, which was larger than what the company originally planned but fell short of the maximum it had filed to sell, had total demand of $87 billion, a source with knowledge of the deal told Reuters. The bids included 98 billion reais ($57 billion) from existing shareholders and $30 billion from institutional investors, a source with knowledge of the transaction said.

Sovereign wealth funds from the Middle East and Asia were among the investors buying into the offering, the source said on condition of anonymity. The offering had "tremendous demand" from U.S. mutual funds, the source added. Petrobras said in the filing that it may sell another 188 million new shares to meet demand in the next 30 days.

BOON FOR LULA

Banco Bradesco BBI, the investment banking arm of Banco Bradesco, was the lead manager of the offering. Bank of America Merrill Lynch, Citigroup, Santander, Morgan Stanley and Itau BBA, the wholesale banking arm of Itau Unibanco , acted as global bookrunners of the deal.

Petrobras preferred shares , the company's most widely traded class of stock, rose 3.2 percent to 26.80 reais, outpacing a 0.7 percent rise by the Brazil's benchmark Bovespa stock index. That was the share's largest single-day gain since Sept. 3. The deal, comprising a $43 billion oil-for-shares swap with the government and the cash offer that investors settled, topped Japanese telecommunications firm NTT's $36.8 billion 1987 share sale and Agricultural Bank of China's $22.1 billion initial public offering earlier this year.