Asian stocks made a cautious advance on Monday following a recovery on Wall Street, with gains for oil prices shoring up demand for energy shares.

Oil was helped by dollar weakness, as the greenback dipped against the euro and the yen on concerns about the U.S. housing sector and credit-linked losses at financial institutions.

Tokyo's Nikkei rose 0.3 percent, while MSCI's index of other Asia-Pacific stocks gained 0.5 percent, after dropping 3.4 percent last week.

Investors see the fourth quarter will be better for some companies, but they are always concerned over the credit crisis and rising oil prices, said Jason Hwang, a strategist at Woori Investment & Securities.

While the MSCI index has fallen about 10 percent from its November 1 record high, it is still up 34 percent this year.

Australia's stock market rose 1.2 percent, lifted by resource and banking stocks. Takeover target Rio Tinto jumped 3.7 percent and suitor BHP Billiton rose 1.7 percent.

Commonwealth Bank of Australia and National Australia Bank were among top gainers, with bank shares across Asia recovering after being hammered by credit fears. Japan's Mitsubishi UFJ and Resona Holdings both advanced more than 3 percent at one point

Banks are seeing some short covering since they were sold fairly actively recently, said Seiichi Mirua, a strategist at Mitsubishi UFJ Securities.

Higher oil prices boosted shares in energy firms such as Australia's Woodside Petroleum, up 3.3 percent, and Japan's INPEX Holdings which rose 0.9 percent.

U.S. crude futures extended the previous session's gains on Monday, rising 67 cents to $94.51 a barrel, after comments by OPEC members at a weekend summit that oil prices were undervalued due to a weak U.S. dollar.

OPEC members were particularly candid about the poor showing of the dollar -- especially as their closed-door discussions were for a short while beamed to reporters by mistake -- with Iran and Venezuela calling for oil to be priced in a basket of currencies.

The dollar was weaker on Monday, with U.S. economic reports late last week adding to a bearish view for the currency.

U.S. industrial output fell 0.5 percent last month, the first drop since May and the largest fall since January.

There are no fundamental reasons to buy the dollar, said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.

The euro climbed 0.2 percent to $1.4685 near an all-time high of $1.4753 hit early last week, while the dollar fell 0.1 percent against the yen to 110.95

The gains for oil and losses for the dollar helped gold rise to $791.50/$792.30 an ounce from $784.80/$785.50 late in New York.

Japanese government futures were steady at 136.99, after hitting a 22-month high of 137.31 on Friday. Investors are cautious about chasing JGBs higher after a rally that has lifted 10-year bond yields by more than 20 basis points since the since start of the month.

(Editing by Lincoln Feast)