Oil prices rose to a seven-week high above $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 said a recovering world economy is expected to boost world crude demand by 700,000 barrels per day next year, to almost 85 million barrels a day.
Last month, OPEC forecast a 500,000 barrel-per-day increase in global demand for next year. The U.S. Energy Information Administration and the Paris-based International Energy Agency raised their 2010 demand forecasts last week.
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 report.
U.S. crude rose 88 cents to settle at $74.15 a barrel, and reached a seven-week high of $74.47 a barrel earlier.
Continue Reading Below
London Brent crude gained $1.04 to settle at $72.40.
The U.S. dollar touched a 14-month low against a basket of other currencies, which helped gold rally to a fresh record high.
Oil prices have surged 65 percent so far this year, but they failed to break a 2009 high of $75 a barrel Tuesday as investors remained wary of the pace of a U.S. economic rebound.
U.S. equities mostly fell after an economic bellwether, consumer goods giant Johnson & Johnson
The S&P 500 index slid for the first time in seven days <.SPX>.
Earnings are due from a number of major U.S. firms this week, and the oil market is tracking corporate results closely for signs of broad economic 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. The National Weather Service forecast 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 in last week's report.
(Additional reporting by David Sheppard in London, Robert Gibbons and Gene Ramos in New York and Jennifer Tan in Singapore; editing by Jim Marshall)