Brent crude oil climbed to 115 dollars per barrel on Monday buoyed by expectations of economic stimulus measures from the U.S. in spite of despite worse-than-expected Chinese trade data.
Chinese imports fell 2.6 per cent year on year in August, confounding expectations of a 3.5 per cent rise. Exports grew 2.7 per cent, below forecasts of a three per cent rise.
But markets are hoping that growing signs of economic slowdown in China and in the U.S. will encourage the U.S. Federal Reserve to pump more money into the economy.
This move could help depress the dollar and boost commodities and oil.
Brent crude futures for October delivery were trading 70 cents higher at 114.95 dollars per barrel, after settling up 76 cents on Friday.
U.S. crude was trading up 12 cents at 96.54 dollars per barrel.
"The market is clearly betting on a third round of quantitative easing from the U.S.," said Tamas Varga, analyst at brokers PvM Oil Associates in London.
"The Chinese data were pretty bearish as were U.S. jobs figures last week.
``But it is a twisted logic: bad news can be good news if it leads to a positive policy response. That is what is pushing up prices now," Varga said.
Monday's Chinese data underscored the severity of a slowdown in the world's second-biggest oil consumer and Chinese oil trade figures showed a sharp decline in fuel imports as export growth slowed.
China's crude oil imports fell 12.5 per cent in August from a year earlier to the lowest daily rate since October 2010.
Implied oil demand in China fell to 8.92 million barrels per day (bpd), underlining flagging domestic demand while the global economic outlook darkens.
Federal Reserve Chairman Ben Bernanke is due to hold a briefing on Thursday after a key policy meeting.
Some analysts are expecting a signal that the U.S. central bank may soon launch a third round of monetary easing, or QE3.
Since 2008, the Federal Reserve has bought 2.3 trillion in long-term securities in a drive to spur growth and revive the economy, indirectly pumping billions into asset markets and bringing sharply higher oil prices.
Weaker-than-expected U.S. jobs figures on Friday reinforced expectations of a move towards the bailout sooner rather than later.