Oil prices rose to a six-month high above $63 a barrel on Wednesday after Saudi Arabia, OPEC's biggest member, said the global economy had strengthened enough to cope with oil at $75-$80 a barrel.
U.S. crude oil for July delivery rose 58 cents to $63.03 a barrel by noon EDT after hitting $63.45, the highest level since mid-November. London Brent crude rose 79 cents to $62.02 a barrel.
Saudi Oil Minister Ali al-Naimi, speaking on the eve of a meeting of the Organization of Petroleum Exporting Countries in Vienna, said oil prices would continue to rise and that the economy was now strong enough to support $75-$80 oil.
The price rise is a function of optimism, better things are coming in the future, Naimi told reporters in Vienna.
The minister said OPEC did not need to change its output policy, which has already seen the group agree to remove 4.2 million barrels per day of oil from the market in a bid to shore up prices battered by recession.
The U.S. Energy Information Administration reacted to the Saudi comment, saying higher oil prices would be detrimental to the economic recovery.
I certainly would think that we are still in some pretty thick economic woods and that it would make sense to not to push things with respect to oil markets, said acting Energy Information Administration head Howard Gruenspecht.
Bolstering the market, U.S. housing data showed the pace of sales of existing homes in the United States rose 2.9 percent in April, supporting views that the three-year housing recession was near a bottom.
But weakness in the U.S. stock market tempered oil's strength. Wall Street shares declined amid gloom around General Motors as it inched closer to bankruptcy.
Everyone talks about green shoots but we're not completely out of the woods -- to see a real price rally we'll need to see a larger pick-up in demand, VTB Capital analyst Andrey Kryuchenkov said.
Global oil demand is seen falling this year at the fastest rate since 1981, with the International Energy Agency, adviser to 28 industrialized nations, predicting a decline of 2.56 million barrels per day.
Crude inventories have risen to around 62 days of forward cover, but U.S. inventories have been declining in recent weeks due to a slowdown in import levels.
Analysts expect data this week to show another decline in U.S. stockpiles, this time by some 1.1 million barrels, according to a preliminary Reuters poll.
Data from the American Petroleum Institute has been delayed by one day until Wednesday afternoon due to the U.S. Memorial Day holiday at the start of this week, while U.S. Energy Information Administration report will be released Thursday .
Prices also shot above the key technical level of the 200-day moving average for the first time in more than eight months, adding to some analysts' convictions that oil has found a new price floor at $60 and may rise toward $65.
(Additional David Sheppard in London, Ayesha Rascoe in Washington, Fayen Wong in Perth; Editing by David Gregorio)