Forex Pros - Crude oil futures were up on Tuesday, rebounding from the previous day's sharp drop, as the U.S. dollar weakened, while influential Wall Street banks Goldman Sachs and Morgan Stanley raised their oil-price forecast.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at USD98.78 a barrel during European morning trade, jumping 1.3%.
It earlier rose by as much as 1.4% to a daily high of USD98.92 a barrel.
The U.S. dollar came under pressure after St. Louis Federal Reserve President James Bullard said Monday that the Fed was likely to keep policy rates on hold after the second round of quantitative easing ends in late June.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.15% to hit 76.16, retreating from a seven-week high.
Dollar-denominated oil futures contracts tend to rise when the dollar falls, as this makes oil cheaper for buyers in other currencies.
Meanwhile, Goldman Sachs raised its 12-month oil-price forecast as the loss of approximately 1.5 million barrels per day of Libyan production and firm demand from emerging economies, will lead to tighter inventories in the second half of the year.
The investment bank now expected oil prices to average USD130 a barrel, compared to a previous estimate of USD105 a barrel.
"It is only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supplies," the Wall Street bank said in a report late Monday.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery climbed 1.32% to trade at USD111.38 a barrel, up USD12.60 on its U.S. counterpart.
Global financial service provider Morgan Stanley raised its 2011 Brent crude forecast to USD120 a barrel, up 20% from a previous estimate.
"It is very likely that OPEC will respond to tightening inventories by lifting their production; in response, we see flat prices moving higher as spare capacity continues its fall to untenable levels," Morgan Stanley analysts said in a report.