Brent crude oil rose above $104 a barrel on Tuesday ahead of a speech by U.S. Federal Reserve Chairman Ben Bernanke that could signal more measures to stimulate economic growth.
Bernanke will present his semi-annual monetary policy report to Congress from 1400 GMT against a backdrop of slowing economic activity at home and Europe's deepening debt crisis.
Central banks in China and Europe have already eased policy to help prop up their economies and the Fed is widely expected to launch a third round of outright bond purchases, or quantitative easing (QE), sometime later this year.
Stock markets .MIWD00000PUS rose, the dollar .DXY fell and the euro firmed, in line with a broad rally in riskier assets.
Brent futures rose $1.38 per barrel to a high of $104.75 a barrel in the fourth straight day of gains. By 1150 GMT, the September Brent contract was up $1.30 at $104.67. The contract is now close to its highest since late May.
U.S. crude rose 40 cents to $88.83, after settling $1.33 higher.
The oil market appears to be looking for reasons to go higher, said Eugen Weinberg, head of global commodity research at Commerzbank in Frankfurt. If Bernanke indicates more stimulus is needed, that would be the catalyst for a rise in prices.
Investors and policymakers are concerned the global economy is heading for another sharp slowdown. Most of Europe is already in recession and growth is slowing rapidly in the United States, China and many of the other large emerging markets.
The International Monetary Fund cut its forecast for global economic growth on Monday and warned prospects would worsen if the euro zone did not sort out its debt crisis.
U.S. retail sales fell in June for the third straight month, the longest run of consecutive drops since 2008, when the country was mired in recession.
Oil prices have fallen by around 25 percent from their peak this year in March on expectations of slowing growth and more modest demand for fuel. But some investors and analysts think the market has been oversold and are now looking for a rally.
Investors are beginning to be more upbeat on oil, not because fundamentals have improved, but because many negative factors, such as weak demand, have been over-estimated, said Weinberg at Commerzbank.
Demand weakness has been priced in and, spare production capacity is limited, leaving the possibility of supply shocks.
Tension over Iran's disputed nuclear program has offered some support to oil prices as the United States has tightened sanctions against Tehran and Europe has imposed an oil embargo.
Geneva-based consultancy Petrologistics said in a report on Tuesday that Iran's oil exports halved in the four months from February to June and are expected to average only just over 1 million barrels per day (bpd) in July, compared with closer to 2.2 million bpd a year ago.
U.S. Secretary of State Hillary Clinton said on Monday the United States and Israel were on the same page in their determination to prevent Iran from achieving what the West fears is its goal of building a nuclear bomb.
World powers and Iran have had several rounds of talks to resolve the standoff.
A U.S. Navy vessel off the United Arab Emirates fired on a fishing boat on Monday killing one and injuring three, serving as another reminder of how quickly a confrontation can turn deadly in the Gulf.