Oil prices jumped 4 percent to above $77 a barrel on Tuesday, responding to a weaker U.S. dollar, stronger equities, and growing tensions over sanctions against Iran.
U.S. crude for March delivery rose $2.94 to $77.07 a barrel by 1:36 p.m. EST. In London, the benchmark Brent crude contract for April delivery rose $3.26 to $75.77 a barrel.
Trading volumes were light, with much of Asia shut for the Lunar New Year holiday and U.S. markets opening after Monday's closure for the Presidents Day holiday. There was no settlement price on Monday as floor activity on the New York Mercantile Exchange was closed.
The oil market is reacting to the dollar being weak, and that is a big part of why crude futures are higher today, Phil Flynn, an analyst at PFGBest Research in Chicago, said.
At the same time, we are seeing prices of other commodities, such as gold, silver and copper, rise sharply. Trading volume is light at this point and that is making price moves faster than they would be if volumes were heavier, he added.
The U.S. dollar slipped against the euro on Tuesday as some traders felt the European currency had dropped too far in recent weeks over concerns about the Greek economy.
A strong dollar tends to pressure dollar-priced commodities as they become more expensive for holders of other currencies.
Wall Street stock indexes were lifted by commodity-related shares and by a jump in New York state's manufacturing index, which rose more than expected in February.
Expectations of an economic recovery have supported oil prices, which have traded in a relatively tight $15 range between $69 and $84 a barrel since the beginning of October.
Prices had climbed to a record above $147 a barrel in July 2008, then fell to less than $33 at the end of that year.
Iranian President Mahmoud Ahmadinejad said talks were still going on over a proposed nuclear fuel swap and any country that tried to impose new sanctions on Iran would regret its actions.
Secretary of State Hillary Clinton has sought backing from oil giant Saudi Arabia to help win Chinese support for additional sanctions targeting Iran's Revolutionary Guards.
In Nigeria, the acting president, Goodluck Jonathan, is looking for swift progress reviving an amnesty program in the oil-producing Niger Delta, where years of attacks by militants have disrupted supplies.
U.S. oil inventory reports will be published a day later than usual this week because of Monday's holiday.
The American Petroleum Institute will release statistics collated from industry sources on Wednesday, followed by government data from the Energy Information Administration on Thursday.
(Additional reporting by Jo Winterbottom in London, Alejandro Barbajosa in Singapore; Editing by Walter Bagley)