Oil climbed to above $78 a barrel on Tuesday, adding to the previous session's advance, lifted by solid manufacturing data from China and easing concerns over Dubai's debt problems.
Wall Street got off to a firmer opening, following on from gains in Europe and Asia as investors' appetite for relatively risky equities increased. The dollar fell against a basket of currencies.
"Dubai fears seem to be fading away," said Carsten Fritsch, analyst at Commerzbank. "Once again, it is financial market developments — a weaker dollar, rising stock markets and rising risk appetite," he said of oil's rise.
U.S. crude for January delivery rose $1.31 to $78.59 a barrel by 1444 GMT. Brent crude added $1.25 to $79.72.
The catalyst for the easing concern about Dubai's debt was an announcement on Monday from Dubai World, centre of the debt storm, that its planned restructuring of some units involved $26 billion in debt.
Further price support came from manufacturing data from China. The economy of the world's second-largest oil consumer is is ending the year on a strong note, a pair of business surveys showed.
Oil had risen on Monday partly after Iran detained a group of British sailors on a yacht. Britain is among the Western powers embroiled in a long-running row with Tehran over the Islamic Republic's nuclear ambitions.
U.S. economic data due for release on Tuesday include pending home sales and construction spending for October.
Later in the session, the American Petroleum Institute's weekly report will give the latest indication of fuel demand in the world's largest consumer. Crude stockpiles probably were little changed, a Reuters poll showed.
Oil has rallied from below $33 last December but has held in a narrow band of $70 to $82 over the past two months. Some analysts see little chance that would push prices above the range given ample supplies.
"We see little impetus for a break to the upside, even if economic indicators surprise to the upside this week," Credit Suisse analysts said in a research note.
"The inventory overhang in the diesel and heating oil markets should prevent prices from breaking higher for the time being."
