Oil rose more than $4 per barrel to above $52 on Thursday as the G20 summit in London raised hopes of a package of measures to restore global growth.
Traders said the market was optimistic the meeting of the world's leaders would come up with ways to soften the economic crisis and bring an end eventually to the credit squeeze.
The G20 will agree to triple the IMF war chest to fight the worst economic crisis since the 1930's and impose curbs on markets, sources at the G20 summit said.
U.S. stocks rose for a third straight session with the Dow Jones industrial average <.DJI>, Standard & Poor's 500 Index <.SPX> and Nasdaq <.IXIC> all up more than 2.5 percent. <.N>
European shares also rose sharply after Asian stocks hit a three-month high with Tokyo's Nikkei up 4.4 percent. <.EU> <.T>
U.S. light crude oil for May delivery rose to a high of $52.42 per barrel, up $4.03, before slipping back to trade around $52.01 by 1505 GMT (11:05 a.m. EDT). London Brent crude was up $3.80 at $52.24 a barrel.
Analysts said the positive language coming out of the G20 summit had increased the risk appetite for investors in many classes of assets, oil included, by raising hopes of a coordinated effort to tackle the economic downturn.
RISK APPETITE RISING
Risk appetite is rising and the sharp jump in oil prices have clearly triggered a number of buy stops that have added to the momentum of the move upwards, said Mike Wittner, head of oil research at Societe Generale.
Tony Machacek, oil broker at Bache Commodities in London, said the technical picture had strengthened as oil prices rose.
It's managed to pop back above $50 which could be giving the market a bit of a boost from a technical perspective, he said. There seems to be a G20 factor -- the stock markets are strong and the dollar is weaker. That is also helping.
Oil has fallen nearly $100 from a record high above $147 in July 2008 as the economic downturn has dented global energy demand, particularly in the United States.
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, according to Labor Department data on Thursday.
Initial claims for state unemployment insurance benefits rose 12,000 to a seasonally adjusted 669,000 in the week ended March 28, the highest since the week ending October 2, 1982, from an upwardly revised 657,000 the week before.
A Saudi Arabian official said on Thursday oil demand from developed countries would decline this year, although demand could revive if the economy improved.
The head of the International Energy Agency sounded a similar note, saying the agency was likely to cut its oil demand forecasts significantly.
We now have data from not only the IMF but the OECD. They all look gloomy. Inevitably, the possible downward revision can be significant but I cannot say how big.
Investors were looking ahead to U.S. non-farm payrolls data on Friday, which could put downward pressure on oil prices.
Forecasters polled by Reuters expect non-farm payrolls to show a fall of 650,000 for March, similar to the 651,000 shed in February.
(Additional reporting by Alex Lawler in London and Osamu Tsukimori in Tokyo; editing by James Jukwey)