Oil edged up toward $55 a barrel on Tuesday, reaching the highest price of 2009, as rising equities and hopes for an economic recovery countered swelling oil inventories and falling demand.
U.S. crude was down 18 cents to $54.29 a barrel at 1314 GMT (9:14 a.m. EDT), having earlier risen as high as $54.83, topping the previous 2009 peak of $54.66. London Brent was down 8 cents at $54.50.
European shares were at their highest in nearly four months by midday on Tuesday on hopes that U.S. government stress tests on banks would reveal only modest capital shortfalls. Wall Street was expected to open lower.
Adding support to oil, the dollar weakened against a basket of other major currencies. <.DXY> A weaker dollar can boost the appeal of oil and other dollar-denominated commodities to some investors.
Oil has been trading between $44 and $55 for the past two months, having recovered from $32.40, the lowest since early 2004, in December. It remains down sharply from the record high above $147 reached in July, 2008.
Positive economic signs from China and India have also helped support oil.
A Chinese manufacturing index based on a poll of industry executives conducted for Hong Kong-based brokerage CLSA rose to a nine-month high of 50.1 in April from 44.8 in March.
India's factory activity expanded in April for the first time in five months, according to the ABN AMRO Bank purchasing managers' index.
Some point out that despite oil's rise, its fundamentals of supply, demand and inventories remain bearish.
A Reuters poll of seven analysts forecast U.S. inventory reports due this week would show crude stocks probably rose for the ninth consecutive week last week, leaving them at a near 19-year high.
The poll also showed an average forecast for a 1.0 million barrel increase in distillate stocks and a 700,000 barrel rise in gasoline supplies.
We're back into the same sideways range, albeit the top of it, said Christopher Bellew, a broker at Bache Commodities. It's too early for the market to break to the upside with stocks so high.
(Additional reporting by Maryelle Demongeot in Singapore; Editing by James Jukwey)