Oil prices held above $85 a barrel Monday as growing investor optimism about the U.S. economy boosted equity and commodity prices.
By early afternoon in Europe, benchmark crude for May delivery was up 26 cents to $85.38 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it rose as high as $85.63. On Friday, the contract gained $1.42 to settle at $85.12.
"Stronger-than-expected data on order intake and U.S. home sales have kindled hopes that the economic recovery of the world's largest oil consumer is gaining momentum," said a report from Commerzbank in Frankfurt.
Gains by the dollar, however, were helping to cap oil prices by making crude more expensive for investors holding other currencies.
The euro fell to $1.3319 from $1.3390 late Friday in New York and the dollar rose to 94.19 Japanese yen from 94.03 yen.
Oil prices have bobbed around $85 a barrel for about three weeks, holding gains after a jump from $69 in February amid signs the U.S. economy is improving.
The Dow Jones industrial average rose 0.6 percent Friday, and most Asian and European stock indices gained on Monday.
Oil traders often look to equity markets as a barometer of overall investor sentiment.
"The economic health of the U.S. is getting better," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "The positive economic data has supported the increasing confidence among investors, and that's bullish for oil."
Despite growing corporate earnings, the unemployment rate remains high and U.S. crude demand hasn't yet recovered strongly.
"Crude inventories are still very high," Shum said. "Oil prices would be a lot lower than $85 if you worried about fundamentals."
In other Nymex trading in May contracts, heating oil rose 0.60 cent to $2.2565 a gallon, and gasoline increased 0.73 cent to $2.3604 a gallon. Natural gas jumped 4.9 cents to $4.306 per 1,000 cubic feet.
In London, Brent crude was up 29 cents at $87.54 on the ICE futures exchange.