Oil rose for a second day and accelerated gains after reaching $75 on optimism that the US economy has turned the corner following strong manufacturing data for January.
US crude for March delivery reached $75.44 a barrel, the highest intraday price since January 22nd, after prices touched $75, triggering automatic buy orders.
It was trading up 53 cents at $74.95 at 0245 GMT, having rebounded by almost $3 from last week's 2010 lows.
London ICE Brent gained 53 cents to $73.64.
"People are quite nervous around $75," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
"There was short-covering after prices broke above that level. In the very short term, the market has been oversold, so some people see it as a good time to buy on dips below the $75-$80 range."
An industry report showed yesterday that the US manufacturing sector grew in January at a faster rate than expected, in a sixth-straight month of expansion.
The Institute for Supply Management (ISM) index rose to its highest since August 2004, a sign the world's top economy is recovering from the deepest recession in decades, which could boost oil demand.
The Australian dollar retained broad gains ahead of a widely expected interest rate increase later in the day, reflecting strength across commodities markets.
But US crude inventories remain at unseasonably high levels and they probably fell just marginally last week following disruptions at a Texas port.
The nation's crude stockpiles probably slipped by 200,000 barrels in the week ended January 29th, while inventories of distillates, which includes heating oil and diesel, may have declined by 900,000 barrels, a Reuters preliminary survey showed.
Gasoline stocks probably climbed 1.3 million barrels, the poll showed.
Ship traffic was back to normal operations along the Sabine-Neches Waterway on Sunday after a tanker collision and oil spill on January 23rd shut the channel that supplies crude oil to four US refineries.
Industry group American Petroleum Institute's inventory report will be released at 9.30pm today, followed by government statistics from the US Energy Information Administration tomorrow at 3.30pm.
Reuters