Oil rose $1 on Tuesday to top $69 a barrel, boosted by the weaker dollar and expectations of another draw in U.S. crude inventories.
U.S. crude traded up $1.04 to $69.13 a barrel by 11:56 a.m. EDT, rebounding from two days of losses. London Brent crude gained $1.08 to trade at $68.96 a barrel.
Oil prices have more than doubled since February, rising with equities and helped by currency movements as a weaker greenback makes dollar-denominated commodities cheaper.
Expectations of global economic recovery and a potential rise in fuel demand have spurred buying across a range of markets.
The crude oil market is up, getting guidance from the stock market and the weaker dollar, said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.
The dollar fell against major currencies as investors questioned whether the economy had improved enough to justify talk of higher U.S. interest rates by year end.
The Nasdaq rose in early activity while the S&P 500 fell after opening higher.
Traders were also awaiting U.S. inventory data due out later today from the American Petroleum Institude, which was expected to show a 400,000-barrel draw in crude oil stockpiles, according to a Reuters poll.
It will be followed by U.S. Energy Information Administration data on Wednesday.
Societe Generale on Tuesday raised its year-end crude oil price forecasts for 2009 by $8.50, to $65 a barrel, in the third quarter and lifted its fourth-quarter forecast by $11.50, to $72.50, citing higher expected U.S. five-year inflation in a research note.
Historically, the relationship between oil and inflation expectations is much stronger than oil and the dollar, said Mike Wittner, global head of oil research at Societe Generale.
Oil prices are being driven lately more by nonfundamental
than fundamentals, and this (five-year inflationary) nonfundamental factor looks like it's going to be with us for a while.
(Reporting by Matthew Robinson and Gene Ramos in New York, Christopher Baldwin in London and Maryelle Demongeot in Singapore; Editing by Christian Wiessner)