Oil jumped more than 6 percent on Thursday to top $51 a barrel after the U.S. Federal Reserve announced a new plan to fight recession and a weak dollar boosted the appeal of commodities to investors.
U.S. crude rose $3.16 to $51.30 a barrel by 1422 p.m. EDT, having earlier traded as high as $52.25, the highest since December 1, 2008. London Brent rose $2.96 to $50.62 a barrel.
It's all about the Fed move, said Tom Knight of Truman Arnold. (The) weaker dollar supports higher dollar-denominated oil (and other commodity prices) and fuels inflation fears, too.
The Fed said on Wednesday it will purchase $300 billion of long-dated Treasuries over the next six months, its first large-scale purchases of government debt since the early 1960s, while also boosting buying of mortgage-backed securities and agency debt in its bid to rescue the economy.
The U.S. dollar extended a sharp sell-off on Thursday, a day after posting its biggest one-day loss against a basket of currencies since at least 1985.
The lower dollar supported other commodities, with the Reuters-Jefferies CRB index <.CRB>, a global commodities benchmark, hitting a five-week high Thursday.
The slumping global economy has battered oil demand, sending crude prices tumbling from record highs over $147 a barrel in July.
The International Monetary Fund on Thursday forecast the world economy will contract in 2009 for the first time since World War Two by between 0.5 percent and 1.0 percent.
Oil eased from intra-day highs after U.S. jobs data showing a record high in the number drawing state unemployment benefits highlighted the extent of the downturn in the world's top oil consumer.
The Organization of the Petroleum Exporting Countries on Sunday pledged to comply more strictly with deep supply curbs agreed last year as part of efforts to balance markets and support prices.
Saudi Arabian Oil Minister Ali al-Naimi, the group's most influential voice, said on Wednesday he believed OPEC had managed to put a floor under the market.
I think OPEC has succeeded in stabilizing prices, he said. The next thing is to hope for a gradual improvement in prices over time.
UK consultancy Oil Movements said in its latest weekly estimate that OPEC seaborne oil exports, excluding Angola and Ecuador, will fall to the lowest level since September 2003 in the four weeks to April 4.
(Reporting by Matthew Robinson, Robert Gibbons, and Gene Ramos in New York, Alex Lawler in London and Fayen Wong in Perth; Editing by Christian Wiessner)