U.S. crude for March delivery touched $77.66 a barrel, the highest price since January 21, and was trading up 22 cents at $77.45 at 0758 GMT (2:58 a.m. EST). On Tuesday it soared 3.8 percent, the biggest gain for a front-month contract since September 30. London ICE Brent crude for March rose 26 cents to $76.32.
MSCI's Asia ex-Japan resources and energy indexes both rose 2.5 percent on the back of firmer commodity prices, and were the biggest contributors to the broader rise in Asian shares.
We've had several months of indicators that suggest that economic expansion is under way, and this is likely to translate into higher oil demand for industrialized countries, said Stefan Graber, a commodities analyst with Credit Suisse in Singapore.
Shares in Chinese oil and gas producer CNOOC rose as much as 11 percent after the company issued 2010 production forecasts that exceeded expectations.
Prices had slipped earlier after an industry report showed U.S. crude inventories rose more than expected, damping optimism of a recovery in demand.
Crude stocks jumped by 4.7 million barrels last week, the American Petroleum Institute (API) said in a report late on Tuesday. That compared to an average forecast gain of 200,000-barrel in a Reuters poll.
The U.S. is still showing weak demand figures, If we see new disappointing numbers, we could see the price increase slow down, Graber said, referring to government oil inventory and demand data to be published later on Wednesday.
The price of crude is still nearly 48 percent below its July 2008 high of more than $147 a barrel.
U.S. equities rose for a second day on Tuesday after positive earnings reports from economic bellwether companies United Parcel Service and Emerson Electric. A rise in pending home sales also helped bolster stocks. <.N>
Monday's news that the Institute for Supply Management's index rose to its highest since August 2004 raised expectations for a strong recovery in U.S. manufacturing.
If we see overall oil demand in the U.S. improve, and that oil product inventories are being worked off, that would be a positive signal for the market, Graber said.
The API said gasoline stocks fell 1.2 million barrels and distillate stocks shed 1 million barrels.The government's Energy Information Administration (EIA) will release stockpile and demand statistics on Wednesday at 1630 GMT (11:30 a.m. EST).
U.S. crude fell below $73 a barrel on Friday, shedding more than $11 from a 15-month high of almost $84 on January 11.
The correction that we saw was really in line with the drop in risk appetite across markets, Graber said. With the global economic recovery on track, the positive fundamentals for specific commodity markets should be of more importance.
U.S. gasoline stocks were forecast to have risen by 1.3 million barrels in the week to January 29 and total distillate stocks, including heating oil and diesel, were projected to have fallen 1.1 million barrels.
Weekly throughput at Japanese refineries declined last week for the first time in five weeks, industry data showed on Wednesday, as milder winter weather weakened heating-fuel demand.
(Editing by Ramthan Hussain and Clarence Fernandez)