U.S. crude futures rallied to a one-year high above $80 a barrel on Tuesday, lifted by a slump in the dollar to a 14-month low and a rally in U.S. stock markets to their highest in 12 months.
Strong earnings have boosted U.S. equity markets, with the Dow industrials up another 1 percent on Monday, beating down the dollar to make a range of commodities more appealing for non-dollar buyers.
Apple became the latest company to report solid quarterly numbers, after the close of New York markets.
U.S. crude for November delivery touched $80.05 a barrel in Asia, its highest since October 14 last year, but retreated to $79.80 a barrel by 0515 GMT, up 19 cents from Monday's settlement.
London Brent crude rose 22 cents to $77.99 a barrel and earlier touched $78.18.
This is a demand story. If we focused on supply this market would be falling, ANZ's senior commodities analyst Mark Pervan said.
I think we will continue higher as we move further into the fourth quarter. Investors think equity earnings are a good guide for the economic outlook so the better-than-expected reporting season is supporting.
He added distillate stockpiles were likely to fall as the quarter wears on and winter takes hold in the northern hemisphere, which could trigger covering of remaining short positions.
U.S. weekly oil inventory data from the American Petroleum Institute is released later in the day.
A preliminary Reuters poll of analysts forecast the data will show a 2 million barrel build in crude stocks last week. Distillate stocks were seen falling by 1.6 million barrels while gasoline inventories were forecast to fall by 1.5 million barrels.
The nine straight days of prices gains have lifted oil by 15 percent and equal a run seen in July, putting crude on track for its strongest monthly performance since May, although other analysts are concerned whether the rally can continue.
Oil broke above resistance at $75. $80 is the next target although there is little in the way of fundamental support. OPEC is overproducing and even though there is talk of a severe winter, distillate stocks are at 26-year highs, MF Global analyst Edward Meir said. You have the November contract expiration. That could also weigh as it gets flushed out and drags the rest of the curve down. I'd be cautious today.
The soggy dollar trading around 14-month low and just shy of $1.50 versus the euro, as investors bet the Federal Reserve will hold U.S. interest rates near zero.
(Editing by Michael Urquhart)