Oil rose above $43 a barrel to its highest level so far in 2016 on Tuesday, supported by hopes that a meeting of oil producers will agree steps to tackle a supply glut, a weak US dollar and further signs of strong demand in China.
Many members of OPEC plus outside producers are meeting in Doha, Qatar, on Sunday to discuss freezing output. The dollar fell earlier on Tuesday to its lowest in nearly eight months against a basket of currencies before recovering, Reuters reported.
Brent crude was up 47 cents at $43.30 a barrel, having reached a 2016 high of $43.58 earlier in the session. US crude rose 20 cents to $40.56.
"The weak dollar is one important reason," said Eugen Weinberg of Commerzbank. "Also, the fact that we are above $40 and at multi-month highs is also contributing to the price increase as it is prompting some speculative buying."
Senior Iraqi oil official Falah Alamri said he was confident the Doha meeting would result in a deal to freeze output, which would signal that prices have bottomed out. Brent hit a 12-year low close to $27 in January.
Also supporting the prices was the rising vehicle sales in China, a further sign of strong gasoline demand in the No. 2 consumer, and a plan by thousands of oil and gas workers in Kuwait to go on strike from Sunday.
Oil prices have collapsed from above $100 in mid-2014 due to oversupply. The Organization of Petroleum Exporting Countries' decision in November 2014 to abandon its traditional role of cutting output helped deepen the decline.
In a sign that oversupply may be easing, the structure of the Brent crude market has strengthened and the discount at which the first-month contract is trading to the second- known as contango-has narrowed significantly.
Crude gained a boost last week after a surprise decline in US inventories from a record high. But this week's US supply reports are expected to show an increase in stocks of 2.8 million barrels.
