Crude oil rose to a seven-week high near $74 a barrel on Tuesday after OPEC raised its 2010 demand forecast and the dollar weakened, boosting demand for commodities.
The Organization of the Petroleum Exporting Countries forecast a recovering world economy would boost world crude demand by 700,000 barrels per day next year, to 84.93 million bpd.
OPEC, which pumps a third of world supplies, had previously projected global oil demand would recover by just 500,000 bpd next year.
The world economy now appears to be entering into a new phase, moving from a period of containing the crisis to one of economic recovery, OPEC said in its monthly market report.
U.S. crude rose 43 cents to $73.70 by 12:28 p.m. EDT, having earlier hit a seven-week high of $74.47 a barrel. Oil prices have surged by 65 percent this year.
London Brent crude gained 60 cents to $71.96.
The U.S. dollar weakened to 14-month low against the euro and a basket of currencies, which helped gold rally to a new record high. Dollar-priced commodities such as oil and gold tend to rise when the greenback falls as they become cheaper for holders of other currencies.
Oil prices rose for a fourth day, but failed to break a year-high of $75 a barrel, as investors remained concerned over the pace of a U.S. economic rebound.
U.S. equities opened lower after consumer goods giant Johnson & Johnson reported disappointing quarterly sales figures, raising concerns about the pace of consumer spending.
The S&P 500 index slid from positive to negative territory in afternoon trade, after stocks gained in six previous sessions. <.SPX>
With earnings due from a number of major U.S. firms this week, the oil market is taking cues from Wall Street, as investors gauge the strength of the nascent recovery.
The weak dollar is a reason we're in positive territory today, said Tim Evans, analyst at Citi Futures Perspective in New York. The crude oil market has also become obsessed with the S&P (stock) index.
Cold weather in the United States also helped boost oil prices, with the National Weather Service forecasting the first seasonal wave of cold weather in the Northeast and Midwest would boost demand for heating oil to 43 percent above normal levels.
U.S. weekly oil inventory data from the American Petroleum Institute (API) will be delayed until Wednesday due to Monday's Columbus Day holiday, while the Energy Information Administration (EIA) report will be released on Thursday.
A Reuters poll of analysts forecast the data will show a 700,000-barrel build in crude stocks last week, after a surprise drawdown last week.
(Additional reporting by David Sheppard in London, Robert Gibbons in New York and Jennifer Tan in Singapore; Editing by Lisa Shumaker)