U.S. oil prices jumped more than 5 percent to over $44 a barrel on Thursday on expectations OPEC will cut output again and on signs of a rebound in gasoline demand in top consumer the United States.
U.S. crude for April delivery gained $2.20 to trade at $44.70 a barrel by 1:45 p.m. EST. London Brent crude rose $1.60 to $45.89 a barrel.
Support also came from U.S. government data released on Wednesday which showed U.S. gasoline demand rising over the four weeks to February 20.
The market is surging on follow-through buying after yesterday's bullish gasoline data, UAE cutbacks and the equity market bounce, said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.
The global economic crisis has damped demand, pushing oil off record peaks over $147 a barrel struck in July.
U.S. stocks rose early as news that the Obama administration may seek more money to shore up the ailing financial sector added to optimism that major banks would not be nationalized. Stocks turned negative later as healthcare and consumer staples companies slid.
Obama's budget proposal, unveiled on Thursday, pencils in the possibility he may request an additional $250 billion to help fix the trouble U.S. financial system.
The budget outline also calls for eliminating substantial tax breaks and increasing fees for the oil and natural gas industry.
Since September, the Organization of Petroleum Exporting Countries has pledged to cut output by 4.3 million barrels per day (bpd) as part of efforts to stem the steep drop in prices as demand shrinks.
Abu Dhabi's move to cut allocations may pre-empt a decision by OPEC to cut more when the group meets in Vienna next month.
This has been interpreted as good evidence that OPEC members will continue to cut at their March meeting, Barclays Capital said.
Venezuela wants OPEC to agree to a new oil output cut, the nation's oil minister said, adding that significant oversupply in the market is weighing on crude prices.
However, Ecuador's oil minister said there was no need for OPEC to cut output again during its next meeting as world oil prices stabilize.
(Reporting by Matthew Robinson, Gene Ramos and Robert Gibbons in New York, Christopher Johnson and Chris Baldwin in London and Jennifer Tan in Singapore; Editing by David Gregorio)