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Oil prices rose to fresh four-month peaks on Tuesday amid renewed hopes for economic recovery in the wake of a US government plan to clear toxic assets from bank balance sheets.
New York's main futures contract, light sweet crude for delivery in May, increased 18 cents to close at 53.99 dollars per barrel, recouping early losses from profit taking.
London's Brent North Sea crude for May delivery managed a gain of three cents to settle at 53.50 dollars a barrel.
Crude futures had hit the highest levels since late 2008 on Monday, mirroring a world stock market rally, after the announcement of a US government plan to rid ailing banks of their troubled assets to help fuel an economic recovery.
Rod Smyth, strategist at Riverfront Investment Group, said oil and other commodities are likely to be in favor in view of the US government's massive effort to print money and boost credit.
"We believe commodities are the asset class most likely to benefit from this monetary expansion," he said in a note to clients.
"If the stimulus works and economic demand recovers, economically sensitive commodities like oil and industrial metals will benefit. If the stimulus fails and investors become increasingly nervous about the dollar because the Fed is printing so much money, commodities and especially gold with hold their value."
The US Treasury unveiled a long-awaited plan Monday to buy up toxic assets clogging the financial system using government funds, loans to investors and guarantees intended to attract private capital.
Analysts said the huge US plan could revive credit and reverse flagging oil demand in the world's largest energy-consuming nation.
John Kilduff at MF Global said the strong stock and commodity market response to the latest US rescue efforts suggests increased optimism but that the road to recovery may be rocky.
"While the markets have seemingly cast an assenting vote, and investors appear cheered that the worst may be over, there is a lot that can still go wrong," he said.
"The coming G20 (Group of 20 summit) meeting in London is strewn with obstacles as the recently concluded finance ministers meeting showed. The US, UK and China think repeated rounds of stimulus will right their economies while the EU believes they have done enough and further regulation holds the key to repairing the financial system and restoring economic stability."
