Oil rose well over a dollar to more than $79 a barrel on Monday after Hurricane Ida forced the shut in of U.S. oil and gas production and Group of 20 talks sent equities up and the dollar down.
U.S. crude for December delivery rose $1.74 to $79.17 a barrel by 1409 GMT, just off a session high of $79.23. The contract had fallen by 3 percent on Friday.
London Brent crude gained $1.63 to $77.50.
Hurricane Ida, the first real storm threat of the 2009 season, was downgraded to Category 1 on Monday, but only after U.S. oil companies had shut in production and evacuated workers.
I think it's more buy on the rumor, sell on the fact. It does not seem as if it's (Ida is) strong enough to create structural damage, said Olivier Jakob of Petromatrix.
Nothing fundamental has really changed, but you buy because of the dollar and equities.
Oil prices have rallied from a low of below $33 a barrel hit last December, in line with a rally sustained for much of the year on equities. Stock markets have factored in economic recovery, which would have implications for fuel demand.
At the same time, the dollar has weakened, which can act as a spur to dollar-dominated commodities, such as oil and gold.
Gold touched a record high above $1,100 an ounce on Monday, while the MSCI world equity index increased by around one percent after the Group of 20 pledged to keep stimulus packages in place until economic recovery was assured.
For oil prices, the market's failure to sustain the strength that took it to a year-high of $82 a barrel in October was seen as bearish and speculators have begun to unwind long positions.
The latest data from the Commodity Futures Trading Commission on Friday showed money managers had reduced their net long crude positions on the New York Mercantile Exchange.. Speculative length is still historically high and analysts said further selling was likely.
Fuel inventories are brimming, with U.S. distillate stocks, which include heating oil and diesel, at their highest levels for more than a quarter of a century.
Potentially adding to the oil surplus, Saudi Arabia, the world's top oil exporter, has increased December supplies to large companies and one Asian customer expected to receive full contract volume.
For most, however, deep output cuts were still being enforced and supplies to many were around steady.
Some in the Organization of the Petroleum Exporting Countries have raised the possibility of an increase in production when the group meets in December, but only if oil prices continued to rise and economic recovery were maintained.
United Arab Emirates Oil Minister Mohammed al-Hamli said at the weekend raising oil production was not on the agenda for the producer group.
(For a graphic on the path of Hurricane Ida click on: http://graphics.thomsonreuters.com/119/US_HKIDA1109.gif)
(Additional reporting by Joe Brock; Editing by Keiron Henderson and Karen Foster)