Oil edged up to near $75 a barrel this morning, rising for the third consecutive session, on expectations that OPEC will cut output this week to lift prices that have shed half their value in three months.
In addition, forecasts of colder weather in the US Northeast also supported values.
Signs that the global credit crunch might be easing and comments by US Federal Reserve Chairman Ben Bernanke urging more government spending prompted renewed hopes that the worst of the financial crisis may be over, lending support to oil prices.
US light crude for November delivery rose 25 cents to $74.50 a barrel by 6.47am, after earlier gaining as much as $1.17. Prices jumped by $2.40 yesterday.
The market hit a record high of above $147 in mid-July. London Brent crude shed 3 cents to $72.00 a barrel after rising as much as $1.18 earlier.
"All eyes are certainly on the OPEC team and that is the key short-term driver supporting oil prices," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"The global equities markets have also performed better on increased confidence that the credit freeze is beginning to ease and these are early indications that the macroeconomic outlook may be better than expected."
Asian stocks opened higher on Tuesday, tracking sharp rallies in US markets, with Japan's benchmark Nikkei average up 2.6 per cent and Australia's S&P/ASX 200 index rising 2.7 per cent.
Still, expectations that the Organization of the Petroleum Exporting Countries may only make modest output cuts this week were limiting oil's gains.
An OPEC source told the Saudi-owned al-Hayat newspaper that the cartel might not need a hefty oil output cut when it meets on Friday, as others in OPEC talked of a possible cut of more than a million barrels per day (bpd), perhaps in stages.
While OPEC ministers were expected to cut output at the emergency meeting in Vienna, a debate on how much oil they should take off global markets could be intense as they balance their price needs against risks to a fragile world economy.
The International Energy Agency, which advises industrialised countries, said an OPEC output cut could prolong a global economic slowdown.
Reuters