The price of oil reached a fresh 18-month high on Tuesday on growing hopes of a US-led global economic recovery.
US light crude hit $87.09 a barrel in New York trading, before falling back slightly to $86.84.
Brent crude peaked at $86.63 a barrel - also an 18-month high - before falling to $86.15.
Investors have also signalled their confidence in the US economy with the strengthening of the dollar against both the pound and the euro.
The US dollar was up almost a cent against the euro, with a dollar worth 74.8 euro cents.
It was also up almost half a penny against the pound, with a dollar worth 65.7 pence.
Investors are buying dollars in the wake of positive economic data from the US.
On Monday, the Institute for Supply Management said the US services sector grew at its fastest in nearly four years in March.
At the same time, the National Association of Realtors said pending home sales rose by an unexpectedly strong 8.2% in February.
Last week, the US Labor Department said employers had created 162,000 new jobs in March, the highest monthly number since March 2007.
However, the country's unemployment rate remained at 9.7% for the third month in a row.
The oil price has been gaining steadily since mid-February when it stood at $72 a barrel, amid hopes of strong economic growth in both Asia and the US.
But oil prices are still a long way from the record highs above $147 a barrel that they reached in July 2008.
The rising oil price means that there is likely to be more pain at the petrol pump for UK drivers.
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Motorists are already suffering from a weak pound, which has pushed up the price of oil in that currency, because it is priced in US dollars.
Another factor increasing petrol prices is the implementation of the extra duty of 1p a litre added on 1 April and a further 1p to be added in October.
The combination of tax and oil price rises has pushed the average price of unleaded petrol up to 119.46p a litre - close to the record 119.7p seen in July 2008.