Oil prices leapt Tuesday as commodities gained a boost from gold, which struck an all-time high above 1,000 dollars an ounce as markets fret about the prospects of global recovery from recession.
New York's main contract, light sweet crude for delivery in December, rose 1.47 dollars to close at 79.60 dollars a barrel.
In London, Brent North Sea crude for December climbed 1.56 dollars to settle at 78.11 dollars.
"Oil was down this morning and all of a sudden gold took off like a rocket, and then oil took off as well," said Ellis Eckland, an independent analyst.
"Oil is following the lead of gold as a hard asset," he explained.
"There may be a central bank providing liquidity to the market" that is benefiting commodities, the analyst suggested, noting that commodities are "alternative forms of currencies, especially gold."
Inflation fears stoked by the massive liquidity pumped into the financial sector by central banks recently have pushed investors toward commodities to protect the value of their assets.
The price of gold soared to new record highs Tuesday, topping 1,080 dollars an ounce, a day after the International Monetary Fund announced it sold 200 tonnes of gold to India for 6.7 billion dollars.
"Gold and oil have been moving in the same direction recently," said Adam Sieminski at Deutsche Bank.
"The underlying traditional fundamentals, like supply or demand, have been getting a little bit better but probably not enough to account for the day-to-day variation which has been driven more by technical factors," he said.
Oil prices rose more than one dollar a barrel Monday, buoyed by a weaker dollar and positive US and Chinese economic data that bolstered hopes of stronger demand in the two biggest energy-consuming nations.
The market also digested news that Iraq signed a deal Tuesday with British energy giant BP and China's CNPC to almost triple oil production at a giant southern oilfield.
"The two companies will invest 50 billion dollars in the project," Iraqi Oil Minister Hussein al-Shahristani told reporters.
The 20-year contract is expected to boost production at the Rumaila field from the current one million barrels per day to around 2.8 million bpd within its first six years, the minister said.
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