Oil prices rose 4.5 percent on Tuesday, their biggest gain in nearly three weeks, as weakness in the U.S. dollar fired up inflation fears and triggered a rush of buying across commodities markets.
The surge back over $70 a barrel cast a spotlight on the OPEC cartel on the eve of their production policy meeting in Vienna, with representatives signaling the group would likely keep output restrictions in place.
NYMEX crude for October delivery rose $3.08 to settle at $71.10 a barrel, marking the largest percentage increase since August 19. London Brent crude rose $2.89 to $69.42 a barrel.
The gains came as the dollar slumped to its lowest level in almost a year against a basket of currencies and gold rallied above $1,000 an ounce, its highest since March 2008.
With gold prices testing the $1,000-per-ounce level, commodity price inflation is back in the headlines, said Tim Evans, analyst at Citi Futures Perspective in New York. Although the employment picture remains bleak and will ultimately limit the upside in our view, he added.
The Organization of the Petroleum Exporting Countries meets on Wednesday, with most analysts expecting the group, the source of more than a third of the world's oil supply, to maintain official output levels.
Saudi Arabia's Oil Minister Ali al-Naimi said producers and consumers are happy with current oil prices, though he added world crude inventories appeared too high.
Oil prices, which fell 6.5 percent last week, have been trading in a range between $65 and $75 a barrel since the start of August, with prices swinging on economic data as investors seek clues about the speed of a recovery from the recession.
Investors will be on watch for inventory data, delayed by a day this week due to Monday's holiday. Analysts polled by Reuters on Tuesday expected the data to show a decrease in U.S. crude inventories of 1.5 million barrels.
The American Petroleum Institute's petroleum stocks report will be released Wednesday at 4:30 p.m. EDT and the U.S. Energy Information Administration report will be issued Thursday at 11 a.m. EDT.
Traders will also keep an eye out as Tropical Storm Fred formed in the eastern Atlantic Ocean on Monday with top winds of 40 mph, but did not immediately threaten any land, the U.S. National Hurricane Center said.
(Additional reporting by Nick Trevethan in Singapore and Chris Baldwin in London; Editing by Christian Wiessner)