Oil rises as CIT deal fuels recovery optimism

By Matthew Robinson

NEW YORK (Reuters) - Oil rose on Monday as optimism about a potential global economic recovery lifted markets and expectations of a turnaround in fuel demand.

World markets extended gains from last week on strong corporate earnings and news of a rescue package for troubled U.S. lender CIT CIT.N.

U.S. crude settled up 42 cents at $63.98 a barrel, after rising more than 6 percent last week. Brent crude rose $1.06 to settle at $66.44 a barrel.

Further support came after an index gauging the U.S. economy's prospects increased for a third straight month in June, suggesting the recession was drawing to a close.

The index of leading economic indicators, which is supposed to forecast economic trends six to nine months out, rose 0.7 percent in June following a revised 1.3 percent gain in May, the New York-based Conference Board said.

"I think it's mostly continued follow-through after last week's rally. Economic optimism fuelling stronger equities and the weaker dollar are supporting commodity markets," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.

A survey of economists showed the recession's grip on top oil consumer the United States appeared to be easing but had not yet ended.

The dollar hit a six-week low, also supporting commodities denominated in the greenback, as investors waded back into riskier assets and higher-yielding currencies. <USD/> Gold hit a six-week high and copper touched nine-month peaks while the Reuters-Jefferies CRB index .CRB rose more than 1 percent.