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Oil prices rebounded Tuesday as the dollar weakened against the euro on whetted risk appetite, making crude cheaper for buyers using stronger currencies.
New York's main futures contract, light sweet crude for delivery in March, leapt 1.86 dollars to close at 73.75 dollars a barrel.
In London, Brent North Sea crude for March advanced a hefty 2.02 dollars to settle at 72.13 dollars.
"Oil prices rebound amid signs of recovery in risk appetite," said Costanza Jacazio, a Barclays Capital analyst.
"Despite recent troubles over southern Europe fiscal positions and its negative implications for the pace of economic recovery in the region, at the global level, the recovery remains intact," Jacazio said, adding that oil demand data had proved "generally supportive" over the past few weeks.
Antoine Halff of Newedge Group said the oil market rally Tuesday was driven mainly by the foreign exchange rate.
The euro rebounded sharply against the US currency, briefly surpassing the 1.38 dollar threshold on intense speculation the European Union will help Greece resolve its fiscal crisis after many players had bet against the currency in recent weeks, dealers said.
They said news that European Central Bank president Jean-Claude Trichet was leaving a central bankers' meeting in Sydney early to attend a European Union emergency economic summit in Brussels on Thursday bolstered belief that a deal was in the works.
EU Economic Affairs Commissioner Joaquin Almunia on Tuesday urged European leaders to offer "clear support" for Greece in return for real efforts from Athens to resolve its budget crisis.
A weaker dollar makes dollar-priced oil more attractive for buyers with firmer currencies.
"While the oil price cut for non-dollar denominated economies will be welcomed, crude oil prices should remain relatively stable as it matures as an asset class and a measure of macroeconomic valuation," said Mike Fitzpatrick of MF Global.
Analysts said that crude oil also found support from rising geopolitical risk after Iran, the second-biggest OPEC producer, announced on Tuesday that it had begun further enriching uranium, dismissing warnings of new sanctions from world powers who suspect the Islamic republic's nuclear project is aimed at making a bomb.
"We believe events surrounding Iran have the potential to heat up over the course of 2010, providing upside potential to prices," said Barclays's Jacazio.
The market also got a boost from the prospect of another fierce US snowstorm on the East Coast, which would boost heating fuel demand in the world's largest energy-consuming nation.
The US Department of Energy said after the market close that its weekly petroleum inventories report, usually published on Wednesday, had been delayed by the inclement weather and will be released at 1600 GMT Friday.
Oil prices recovered slightly on Monday after a massive sell-down last week that was triggered by weak US jobs data and the debt problems in Europe.
