The S&P/TSX composite index jumped 162.41 points to a two-month high of 15,062.88.
The TSX energy sector gained four per cent as oil in New York shot up $3.48 to US$53.05 a barrel, adding up to a 19-per cent surge in prices over the last four sessions. However, prices are still down about 50 per cent from the most recent highs reached last June because of a huge oversupply on world markets.
Higher oil prices helped push the Canadian dollar up 1.16 cents US to 80.67 cents US after charging ahead more than eight-tenths of a cent on Monday.
New York markets were also sharply higher as automakers reported double-digit sales increases in the United States in January.
That helped balance other data showing orders to U.S. factories dropped for a fifth consecutive month in December, down 3.4 per cent. Also, a key category that signals business investment plans fell for a fourth straight month.
The Dow Jones industrials soared 305.36 points to 17,666.4, the Nasdaq climbed 51.05 points to 4,727.74 and the S&P 500 index was up 29.18 points at 2,050.03.
Oil companies have responded to oversupply by slashing capital spending plans for drilling and other projects and in some cases cutting production, but analysts warn that it's far too early to sound the all-clear on falling prices.
"There has’t been a ton of material change in the supply-demand imbalance and that is really the fundamental issue," said Ben Jang, portfolio manager at Nicola Wealth Management in Vancouver.
"I think we will see a rebound in prices but after that, we will retest the lows."
BP on Tuesday joined a growing list of companies cutting back, announcing that capital expenditure in 2015 will total around US$20 billion, significantly lower than its previous guidance of $24 billion to $26 billion.
It also reported a loss of US$4.4 billion for the fourth quarter of 2014.
A major energy sector gainer was Canadian Oil Sands (TSX:COS), which jumped C$1.94 or 20.5 per cent to C$11.39. Its stock has soared 60 per cent since Thursday after TD Securities (TSX:TD) raised its price target. There were also reports COS could become a takeover target by one of its partners in Syncrude Canada Ltd., which is a joint venture between seven energy companies.
The base metals sector jumped 6.6 per cent as March copper soared nine cents to US$2.58 a pound.
Financials also lent key support, rising 2.55 per cent.
The gold sector was the major decliner, down about four per cent as April bullion lost $16.60 to US$1,260.30 an ounce.
In other earnings news, WestJet Airlines Ltd. (TSX:WJA) posted a record fourth-quarter profit of $90.7 million or 70 cents a share, in line with estimates. That was up 34 per cent from $67.8 million a year ago. Revenue was $994.4 million, up 7.3 per cent from a year ago and also in line with estimates. The carrier hiked its dividend by 17 per cent as well, but WestJet shares drifted 80 cents lower to $31.10.