At 1030 hrs, far-month August contract rallied by 2.84 per cent to Rs 5,467 per barrel at the Multi Commodity Exchange.
June contract rose 1.88 per cent to Rs 5,475 per barrel, while July month contract was up 1.80 per cent at Rs 5,477 per barrel.
Oil prices jumped nearly $2 a barrel in New York as the US dollar weakened against euro in response to comments by the head of the European Central Bank suggesting the bank could raise interest rates.
Light, sweet crude for July delivery rose $5.49, its biggest single-day rise in the history of the New York Mercantile Crude contract to settle at $127.79.
In London, July Brent crude futures rose 33 cents to $127.87 a barrel on the ICE futures exchange. When interest rates rise in Europe, or fall in the US, dollar tends to weaken against euro. Investors, generally buy commodities such as oil as a hedge against inflation when the dollar is falling.