Brent crude oil surged more than 3 per cent to push above $116 (U.S.) a barrel Tuesday as supply disruptions and more turmoil in the Middle East and North Africa kept investors on edge.
U.S. crude rose more than 2 per cent and settled above $99 a barrel as a Reuters report that human rights activists said Saudi authorities had detained a Shi'ite cleric fueled fears of sectarian conflict in the world's top oil exporter.
Clashes between anti-government protesters and Iran's security forces in Tehran reported by pro-reform websites added to investor concerns about unrest and its effect on the flow of oil supplies in the region.
"The Saudis had seemed to be walking the tightrope and avoiding problems, but the cleric story had people worried that it signaled problems there," said Robert Yawger, senior vice-president, energy futures at MF Global in New York.
Brent crude futures for April rose $3.62 to settle at $115.42 a barrel, the highest finish since front-month Brent closed at $116.22 on Aug. 27, 2008. Brent's intraday peak was $116.32, hit post-settlement.
U.S. crude rose $2.66 to settle at $99.63 a barrel, the highest close since front-month crude ended at $100.64 on Sept. 30, 2008.
Brent's premium to its U.S. counterpart was above $15 a barrel, up more than 80 cents intraday, after last week's record $16.91. Brent's price rise has been stronger because Europe is more vulnerable to supply disruptions from Libya and the region.
LIBYA REVOLT, MIDDLE EAST UNREST
As investors reacted to a rising number of protests and clashes in the region, Muammar Gadhafi remained defiant against the opposition and the United States said Libya faced the danger of civil war if the leader refused to quit.
Ratcheting up the pressure on Gadhafi, the United States is looking at a full range of options for Libya and is sending ships and Marines to the Mediterranean, U.S. defense officials said.
Libya's National Oil Corporation chairman, Shokri Ghanem, said its oil installations were undamaged, although output was halved because of departures by oil workers.
A report in an Egyptian newspaper that Saudi Arabia had sent tanks to Bahrain to try to quell protests there roiled markets briefly, prompting a Saudi defense ministry official to issue a denial.
In Oman, a small oil producer, the army wounded at least one person as it moved to disperse protesters near the northern port of Sohar, witnesses said.
OPEC output fell 200,000 barrels per day in February from a two-year high the previous month as the uprising in Libya curbed supplies and offset Saudi Arabia's increased output, a Reuters survey found.
"We're now at the point where a $1-$2 move is just a normal fluctuation," said Peter Beutel, president at Cameron Hanover in New Canaan, Connecticut.
"At this point, we're rife with rumors and when any emerge from the 'Petroleum Gulf' we're going to see a jump. If there's some truth in it, the move will be $5-$6 rather than $1-$2."
OIL SPIKES COULD HIT GROWTH
U.S. stocks dropped on fears the jump in oil prices could choke off economic recovery, offsetting a positive reading on manufacturing.
The dollar recovered from a 3-1/2-month low against a currency basket hit ahead of Federal Reserve chairman Ben Bernanke's appearance before Congress as the euro again failed to breach resistance at its 2011 high.
Bernanke said the recent surge in oil prices was unlikely to have a big impact on the U.S. economy, but could lead to weaker growth and higher inflation if sustained.