Oil jumped to multi-month highs and copper rebounded on Monday, as investors flocked to riskier assets after China's first bank reserve requirement cut for this year.

Commodities also tracked euro's gains as the dollar weakened on expectations euro zone finance ministers will approve a second bailout for Greece later in the day.

US crude hit a session high of $105.21 a barrel, a level not seen May 2011, before trimming gains to $104.96 by 0326 GMT, up 1.7 percent. Brent crude peaked at $121.15, its highest since mid-June, before easing to $121.04, up 1.5 percent.

Oil also got a lift from news that Iran has halted crude exports to Britain and France although the move was largely symbolic as Tehran did not export much to UK and French firms.

The key driver was China's Saturday announcement that it would cut the amount of cash banks need to park with the central bank in a bid to boost lending, joining global counterparts in stimulating economic growth.

The 50-basis point cut, which will free up between 350-400 billion yuan ($55.6-$63.5 billion) in additional liquidity, was the second reduction in Chinese banks' reserve requirement ratio (RRR) since November and takes effect on February 24.

"We're expecting another 50-basis point cut in RRR in the second quarter and we think credit conditions will be better this year compared to last year," said Siew Huay, an economist at DMG & Partners Securities.

But Bonnie Liu, commodity analyst at Macquarie Securities in Shanghai, said China's move was not a big surprise and may not lift demand in a big way.

"The only surprise was that we were expecting the RRR cut at the end of January. This will help the momentum, but it's not going to help boost physical demand significantly.

"We need the construction market to come back and we need Beijing to give us a signal that they will loosen their grip on the property market," said Liu.

China's home prices fell for a fourth straight month in January, reflecting continuing property market curbs such as tighter lending rules, limiting multiple home ownership and controlling developers' access to land.

JP Morgan Chase raised its 2012 price forecast for Brent by $6 to $118 a barrel on supply risks and a mending global economy. The bank also raised its 2013 forecast for Brent to $125 a barrel, up from $121.

"Ongoing decline in mature areas, supply risks in key producing countries together with the underperformance of some new frontier areas leave us to feel that it will be a greater risk in 2013/2014 than this year," analysts led by Lawrence Eagles said in a research note dated February 19.

"More importantly, building economic momentum, albeit from a weak base, has the potential to pull oil prices higher for the next 12 to 24 months."

Industrial metals also rallied, with benchmark London Metal Exchange copper rising 1.5 percent to $8,301 a tonne, snapping a six-day losing streak. LME zinc jumped nearly 3 percent to $2,001 a tonne.

Spot gold gained 0.8 percent to $1,735.96 an ounce, its biggest daily percentage rise in almost two weeks. - Reuters