Oil prices clawed back some of last week's 1.4 per cent losses today and rose a dollar to above $77 a barrel, as a weaker US dollar and improved sentiments over the economic outlook encouraged traders to push up crude prices.
Positive data from Japan, the world's third-largest energy consumer, whose economy expanded 1.2 per cent in the third quarter from the previous three months, also lent support to oil prices.
US crude futures for December delivery were up 88 cents at $77.23 a barrel by 0545 GMT, after having risen as much as 1.36 percent earlier.
London Brent crude gained 84 cents to $77.15.
"Oil has rallied because of the weak dollar and the positive GDP data out of Japan. Those factors are giving a lot of opportunities for Asian traders to push prices higher," said Benson Wang, a trader at Commodity Broking Services in Sydney.
"But movements in the dollar seems exaggerated because realistically, it will be very difficult for the Chinese government to let its yuan appreciate in the short term because that will risk killing its export industries."
The US dollar drifted lower in Asia today, falling 0.4 per cent against a basket of currencies, as it heads into a week that is likely to see increased rhetoric on currencies during US president Barack Obama's visit to China.
Underlining views that a global economic imbalance is being reflected in the weakening dollar, the head of the International Monetary Fund said a stronger Chinese yuan was part of the reforms that Beijing needed to implement to increase domestic consumption.
The weaker dollar helped push gold prices to a fresh record high today, while US wheat, corn and soybean futures also advanced more than 1 per cent. A weaker dollar typically supports commodities because the dollar-priced contracts become cheaper for buyers using other currencies.
There was little impact from comments by Opec's president, Jose Botelho de Vasconcelos, who said the market was still oversupplied, adding that he was satisfied with current oil prices and compliance, which he put at about 65 per cent.
Hopes of a revival in energy demand from Japan supported prices.
Japan's economy grew at the fastest pace in more than two years in the third quarter, as stimulus lifted consumer spending and capital spending bottomed out.
But with growth largely fuelled by the continued effects of stimulus spending by governments around the world, some analysts warned the recovery may lose momentum in coming quarters due to weak domestic demand.
With the vast majority of corporate results already reported, market watchers are casting around for the next catalyst to set direction for the dollar, stocks and commodities. That will put this week's round of economic data in the spotlight, including US retail sales, the Consumer Price Index and housing starts.
After having fallen about 54 per cent in 2008, oil prices have rebounded nearly 73 per cent so far this year, helped by a weaker dollar and rallying equities markets amid signs of stronger global growth.
Analysts said upside gains to oil prices could be limited, however, with US data pointing to a choppy recovery, while bulging fuel inventories also reflected sluggish energy demand.
Reuters