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NEW YORK - Sugar posted the highest gains in more than four weeks after crude oil surged increasing demand for sugar cane as an alternative source of fuel such as ethanol.

White sugar for August delivery increased by 2 percent or $7.30 to $368.50 a ton on London Liffe exchange.

Oil increased to more than $114 a barrel in New York for a second day as the dollar fell against the euro and other major currencies.

White or refined sugar has increased by 17 percent this year on expectations of growers diverting more cane to ethanol.

Sugar gains were also attributed on an outbreak of sugar-cane smut, in the north coast of New South Wales, Australia, which stunts plants and hampers growth, and was forecasted to reduce yields by 30 percent.

Australia is the world's third largest sugar cane exporter.