Oil rose more than 1 percent toward $75 a barrel on Wednesday, boosted by a weak dollar and optimism about a global economic rebound that will lead to higher energy demand.
Gold hit a record as the dollar slumped to its lowest in more than a year against a basket of currencies, making dollar-denominated commodities like oil and bullion more affordable for holders of other currencies.
U.S. crude rose 82 cents to $74.97 a barrel by 1:15 p.m. EDT, after climbing to a session high of $75.40, the highest this year. Brent crude rose 48 cents to $73.88.
The dollar is weak and people are buying commodities, that's by far the sole and exclusive reason we've seen behind the crude rally today, said Tom Knight, broker at Truman Arnold in Texarkana, Texas.
Oil has more than doubled from below $33 in December amid hopes of economic recovery, a rally many say has run ahead of weak oil demand, high inventories and abundant supply.
The recent rise in oil prices is not driven by fundamentals but by financial market developments and hopes that oil demand will recover sooner rather than later, said Carsten Fritsch, analyst at Commerzbank. But we still need some confirmation of this hope.
Some of that confirmation came on Tuesday when producer group OPEC became the latest forecaster to bump up global oil demand estimates for this year and 2010.
The market is increasingly recognizing that oil demand is indeed recovering, said Mike Wittner at Societe Generale. That's based on two things -- stabilization in U.S. demand and strong growth in Chinese demand.
But it's a bit of a stretch to say that slowly improving fundamentals have caused oil prices to go up by $5 in the past week. The dollar-inflation story has been a part of that, he added.
Asian and European data on Wednesday supported a more optimistic view of the economy.
Chinese trade figures provided fresh evidence of recovery in the world's second-largest oil user, while oil data showed strong year-on-year growth in China's oil imports in September.
And Euro zone industrial output accelerated month-on-month in August, while July production was revised upwards, providing evidence the area's economy is likely to have started growing in the third quarter.
Earnings are due this week from several major U.S. companies, and the oil market is tracking results for signs of economic rebound.
JPMorgan Chase & Co
Cold weather in the United States has also supported prices. Heating demand will be higher than normal this week, the National Weather Service said on Monday.
U.S. inventory data from the American Petroleum Institute was due later on Wednesday, the latest indication of demand in the world's top consumer. A Reuters poll forecasts a 700,000-barrel rise in crude stocks.
Analysts who use past price moves to predict future direction said a further rally would depend on U.S. crude, also known as WTI, closing above resistance at $75.
The advance in WTI is in our view purely technical and dollar linked -- hence reversals can be sharp when and if the dollar stops to fall off the cliff, said Olivier Jakob, analyst at Petromatrix.
(Additional reporting by Gene Ramos and Robert Gibbons in New York, Alex Lawler in London and Jennifer Tan in Singapore; Editing by Christian Wiessner)