Oil rose over 1 per cent and topped $72 a barrel today on growing optimism about the pace of the global economic recovery and a positive demand forecast from the International Energy Agency.
However, gains were limited by a strong US dollar, which rose on the back of comments by Federal Reserve Chairman Ben Bernanke that the US central bank will be ready to tighten its monetary policy as the economy gains strength.
US crude for November delivery rose 40 cents to $72.17 by 0402 GMT, adding to last week's 2.6 per cent gain. London Brent crude rose 43 cents to $70.43.
"There are a lot of positive sentiments in the market because of expectations for another rally in stocks markets this week as well as improved energy demand forecasts from the IEA," said Ben Westmore, a commodities analyst from the National Australia Bank.
"Comments from Ben Bernanke that the monetary policy could be tightened is also an indication that the recovery is taking hold in the US."
US stocks climbed on Friday, with the Dow hitting a closing high for 2009, as investors anticipated positive news from this week's key earnings reports and bullish broker comments boosted tech shares.
Analysts said the stock market is set to continue its winning ways this week as momentum builds during earnings season.
Some of the big corporate names scheduled to post earnings this week are Intel and Johnson & Johnson tomorrow, JPMorgan Chase on Wednesday, Goldman Sachs and IBM on Thursday and Bank of America and General Electric on Friday.
The US dollar held above recent 14-month lows against a basket of currencies today as traders trimmed some of their short dollar positions on expectations that U.S. interest rates will move up earlier than expected.
A positive outlook from the International Energy Agency (IEA) also buoyed oil prices. The IEA said world oil demand will recover at a faster pace than previously expected for the rest of this year and next as the economy picks up.
Separately, money managers increased net long crude oil positions on the New York Mercantile Exchange in the week to October 6th, the Commodity Futures Trading Commission said in a report on Friday.
Reuters