By Barani Krishnan
NEW YORK (Reuters) - Oil rose as much as 3 percent on Tuesday as a weak dollar lifted commodities denominated in the currency and OPEC raised slightly its forecast for world oil demand growth.
Violence in Yemen also boosted crude prices, raising concerns over the security of Middle East supplies.
The dollar fell on bond market gyrations, making oil and other commodities priced in the greenback more affordable to holders of the euro and other currencies.
The Organisation of the Petroleum Exporting Countries tweaked its 2015 world oil demand growth forecast to 1.18 million barrels per day (bpd), above a previous estimate of 1.17 million.
Saudi-led air strikes aimed at Iran-allied Houthis hit on a rocket base in the Yemen capital Sanaa, killing 90 people and wounding 300 ahead of a five-day truce set to begin later Tuesday. Yemen is a marginal oil producer but its proximity to shipping lanes has raised concerns.
Also Read
U.S. crude settled up $1.50, or 2.5 percent, at $60.75 a barrel.
North Sea Brent , a more widely used benchmark for oil, settled up $1.95, or 3 percent, at $66.86.
Oil had its biggest monthly gain in six years in April, rising up to 25 percent on signs a global glut was easing. The market has been beset with volatility since by fears that higher prices were encouraging more production.
"The market is really torn between wanting to be on the bullish side when you have a weaker dollar and geopolitical situations like today, and staying in accordance with fundamentals, when there's already a deluge of West African crude barrels out there without buyers," said Andrew Lipow, president of Houston-based Lipow Oil Associates.
Industry group American Petroleum Institute will issue at 4:30 p.m. EDT its expectations for U.S. oil stockpiles last week. A Reuters poll estimated a crude stock drawdown of 100,000 barrels on average in the week to May 8. The U.S. Energy Information Administration (EIA) will publish on Wednesday official data for last week.
On Tuesday, the EIA cut its 2015 forecast for crude output growth to 530,000 bpd from 550,000, and 2016 growth to 20,000, from 80,000 previously.
Saudi Arabia pumped 10.31 million bpd in April, up from 10.29 million in March, and Iraq plans record oil exports from its southern ports in June, sources said.
Goldman Sachs said the recent rally was "premature" and crude prices were "expensive relative to current and forecast fundamentals."
(Additional reporting by Himanshu Ojha in London and Henning Gloystein and Florence Tan in Singapore; Editing by Lisa Von Ahn, Andrew Hay and Ted Botha)