By early afternoon in Europe, benchmark oil for March delivery was up 35 cents to $97.92 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.13, or 1.2 percent, to close at $97.57 on Tuesday after being pushed higher by a report about rising U.S. home prices. Energy prices can rise when investors feel good about the economy, since energy is needed to power manufacturing and other economic activity.
"Crude oil prices continued their upside momentum and extended gains on Wednesday, as risk appetite increased following the recent robust economic data," said a report from Sucden Financial Research in London. "It seems that market sentiment has recently improved amid optimism about increasing oil demand in the short-term, especially from the U.S. and China."
Traders are also awaiting the release of other U.S. economic indicators, including economic growth on Wednesday and weekly jobless claims Thursday. In addition, the Federal Reserve will conclude a two-day meeting later Wednesday with a statement that investors will study for clues about the outlook for the economy and interest rates.
"There are increasing hopes that the Federal Reserve will re-affirm its commitment to monetary stimulus," Sucden said.
Recent rises in oil prices have been the result of an improving global economy, and positive manufacturing reports from the U.S. and China. But significant gains could be capped by demand constraints and ample supply, analysts said.
"The fundamentals are also likely to deteriorate again later in the year," said analysts at Capital Economics in a report. "Over the longer term, booming energy supply from both conventional and new sources will also add to the downward pressure on prices."
Oil prices were also boosted by the weaker dollar, which makes crude cheaper and a more enticing investment for traders using other currencies. On Wednesday, the euro was helped by rising consumer and business confidence in the 17 countries using the common currency and climbed to $1.3548, up from $1.3487 on Tuesday.
Brent crude, used to price international varieties of oil, was up 51 cents to $114.87 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline gained 0.8 cent to $2.9843 per gallon.
— Natural gas rose 1.3 cents to $3.271 per 1,000 cubic feet.
— Heating oil added 1.78 cents to $3.1164 a gallon.
Pamela Sampson in Bangkok contributed to this report.