U.S. oil prices jumped more than 6 percent to above $45 a barrel on Thursday on expectations OPEC will cut output again and on signs of a rebound in gasoline demand in top consumer the United States.
OPEC member United Arab Emirates announced it was cutting back supplies to Asia for April, adding to expectations the producer group will throttle back production further when it meets in March.
U.S. crude for April delivery gained $2.72 to settle at $45.22 a barrel. London Brent crude settled up $2.22 at $46.51 a barrel.
Support also came from U.S. government data released on Wednesday that showed gasoline demand rising over the four weeks to February 20.
The market is surging on follow-through buying after yesterday's bullish gasoline data, UAE cutbacks and the equity market bounce, said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.
The global economic crisis has damped demand, pulling oil off record peaks above $147 a barrel in July.
U.S. stocks rose early as news that the Obama administration may seek more money to shore up the ailing financial sector added to optimism that major banks would not be nationalized. Stocks turned lower in later activity, after a report showed the number of troubled banks soared in the fourth quarter.
According to the proposed budget, President Barack Obama could funnel up to $750 billion in fresh government aid to the battered banks, more than doubling a financial bailout approved last year.
The budget outline also calls for eliminating substantial tax breaks and increasing fees for the oil and natural gas industry.
Since September, the Organization of Petroleum Exporting Countries has pledged to cut output by 4.3 million barrels per day as part of efforts to stem the steep drop in prices as demand shrinks.
Abu Dhabi's move to cut allocations may pre-empt a decision by OPEC to cut more when the group meets in Vienna next month.
This has been interpreted as good evidence that OPEC members will continue to cut at their March meeting, Barclays Capital said.
Venezuela wants OPEC to agree to a new oil output cut, the nation's oil minister said, adding that significant oversupply in the market is weighing on crude prices.
However, Ecuador's oil minister said there was no need for OPEC to cut output again during its next meeting as world oil prices stabilize.
(Additional reporting by Gene Ramos and Robert Gibbons in New York, Christopher Johnson and Chris Baldwin in London and Jennifer Tan in Singapore; Editing by Walter Bagley)