Oil near $50

Oil rose towards $50 a barrel today, heading for its largest monthly and quarterly gain since June 2008, gaining a lift from rising stock markets and a weaker dollar.

European stocks climbed, with banks and drugmakers taking the lead, following a rise in Asia. A weak dollar can increase the appeal of oil and commodities to some investors.

"The same factors are driving oil and equities -- a little bit of risk appetite," said Mike Wittner, oil analyst at Societe Generale.

"Really, nothing has changed in the near-term fundamentals. We still have a deep recession, sharply contracting demand and high stocks."

U.S. crude rose $1.48 to $49.89 a barrel by 1254 GMT, having earlier climbed more than $1 to as high as $49.94. London Brent crude rose $1.65 to $49.64.

Oil's more than 10 percent rally in March has been prompted by rallying stock markets and lower oil supplies as the Organization of the Petroleum Exporting Countries cuts production.

The price is still down nearly $100 from the record high reached last year because the global economic crisis has eroded oil demand. Worldwide, demand is expected to contract in 2009 for a second consecutive year.

Further evidence of weakening demand came from Japan, the world's third-largest energy consumer, where crude oil imports in February fell 3.3 percent from a year ago.

The Organisation for Economic Co-Operation and Development (OECD) forecast the world economy would shrink far faster than expected, sending unemployment soaring and underscoring the need for extra steps to halt the crisis.

Releasing its outlook as Japan announced it was readying its third stimulus package, the 30-nation OECD said member economies would contract 4.3 percent this year.

The next major indication on oil demand will come from U.S. weekly data which will probably show crude stocks rose for a fourth straight week, according to a preliminary Reuters poll.