Rising demand pushed U.S. crude above US$50 a barrel on Thursday, while sterling jumped after the Bank of England said it was likely to raise interest rates for the first time in a decade in coming months.
Energy shares rose on Wall Street and in Europe, but stocks were mixed worldwide. A gauge of global equity indexes fell slightly, as did the S&P 500 in the United States, while major European indexes gained and the Dow set a new closing high.
West Texas Intermediate, the U.S. crude benchmark, rose more than 2 per cent before paring gains after a forecast by the International Energy Agency on Wednesday and dollar weakness prompted bullish sentiment in the oil market.
"Anticipation is growing that this could quicken the pace of oil market rebalancing," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.
U.S. crude <CLcv1> rose 59 cents to settle at US$49.89 a barrel and Brent settled up 31 cents at US$55.47.
Brent has climbed more than US$10 a barrel over the past three months and is close to where it was at the beginning of the year, roughly trading between US$55 and US$57 a barrel.
BP Chief Executive Bob Dudley told Reuters in an interview that oil prices were likely to stay between US$50 and US$60 a barrel as major producers kept output restricted.
Meanwhile, the new guidance from the Bank of England pushed sterling to a one-year high against the U.S. dollar as investors priced in a more than 50 per cent chance of a rate hike before the year's end.
The central bank said its tolerance for above-target inflation has declined even if Britain's departure from the European Union remained a risk. Data this week showed British prices rising faster and unemployment falling to a four-decade low.
Sterling was last trading at US$1.3402, up 1.45 per cent on the day. Earlier it rose to a 12-month high of US$1.3404.
Britain's blue-chip FTSE 100 share index fell sharply after the BoE warning, which followed a monetary policy meeting, and closed down 1.14 per cent to lows last seen in May.
In other currency trading, the dollar index fell 0.41 per cent, while the euro <EUR=> was up 0.17 per cent to US$1.1905.
The Japanese yen strengthened 0.01 per cent versus the greenback at 110.47 per dollar.
ENERGY SHARES RISE
Energy stocks helped put the Dow in positive territory as Exxon Mobil Corp (XOM.N) rose 0.4 per cent to US$80.09 while Chevron Corp (CVX.N) gained 0.24 per cent to US$114.45.
Also giving the Dow a boost was Boeing Co (BA.N), which rose 1.36 per cent after Deutsche Bank raised its share price target.
In Europe, Italy's ENI SpA rose 0.59 per cent and France's Total SA gained 0.49 per cent, helping lift the EURO STOXX 50 index of leading EU shares.
MSCI's gauge of stocks across the globe shed 0.05 per cent while the pan-European FTSEurofirst 300 index closed up 0.13 per cent.
The Dow Jones Industrial Average rose 45.3 points, or 0.2 per cent, to 22,203.48. The S&P 500 fell 2.75 points, or 0.11 per cent, to 2,495.62 and the Nasdaq Composite dropped 31.10 points, or 0.48 per cent, to 6,429.08.
U.S. Treasury yields briefly extended edged higher with the 10-year yield touching a three-week peak after data showed a faster-than-forecast 0.4 per cent increase in domestic consumer prices in August.
Germany's 10-year bond yield hit a 3-1/2-week high as a rise in domestic consumer prices in the United States rekindled bets of a December interest rate hike in the United States, the world's biggest economy.
Prices of 10-year benchmark U.S. Treasury notes traded little changed to 2.1935 per cent.
German Bunds last rose 1 basis point in price to yield 0.412 per cent.
U.S. gold futures for December delivery settled up 0.1 per cent at US$1,329.30 an ounce.