Oil rose 8 percent to $52 a barrel on Thursday, in line with a broad rally in global markets, on hopes actions agreed at the G20 summit in London would restore global growth.
World leaders agreed a trillion-dollar deal to combat the deepest economic downturn since the Great Depression, and signed off on plans to commission blacklists of tax havens and tighter rules for hedge funds.
U.S. stock markets surged more than 4 percent on news of the deal, which also gives banks more flexibility to value toxic assets.
U.S. crude traded up $4.01 to $52.40 a barrel by 2:23 p.m. EDT, while London Brent crude gained $4.18 to trade at $52.62 a barrel.
The current crude oil market rally is associated with some optimism and expectations emerging from the G20 meeting in London, said Kyle Cooper, director of research at IAF Advisors in Houston.
However, rising oil prices right now are not based on fundamentals as worldwide demand is still poor while inventories are high.
The economic crisis has battered global oil demand, pushing prices off record highs over $147 a barrel hit in July and sending inventories in top consumer the United States to a 16-year high.
The head of the International Energy Agency said the energy advisor to 28 developed nations is likely to lower its global oil demand forecasts significantly as more bleak economic data emerges.
We now have data from not only the IMF, but also the OECD. They all look gloomy, Nobuo Tanaka, the agency's executive director, told Reuters in an interview on the sidelines of a Paris conference.
Inevitably, the possible downward revision could be significant, but I cannot say how big.
OPEC kingpin Saudi Arabia expects demand from developed countries will continue to decline, although global demand may revive later this year if the economy improves, an oil official said.
This pattern of decline within industrialized economies is expected to continue even after the global economic crisis is over, said Ibrahim Muhanna, adviser to Saudi Arabia's petroleum and mineral resources ministry.
OPEC Secretary General Abdullah al-Attiyah said the cartel may be able to live with oil prices around $50 a barrel in 2009, another sign the group has limited its price aspirations for now.
U.S. Labor Department data showed the number of U.S. workers filing new claims for jobless benefits unexpectedly rose to its highest level in over 26 years last week and so-called continued claims jumped to a record high in March.
(Reporting by Matthew Robinson, Gene Ramos, and Robert Gibbons in New York, Christopher Johnson and Alex Lawler in London and Osamu Tsukimori in Tokyo; Editing by Christian Wiessner)