Crude oil futures rose on Thursday a day after the US Federal Reserve said interest rates should remain low well into 2014 and data showed an increase in orders for US manufactured goods. That news sparked buying interest in riskier assets such as oil and other commodities.
A threat from Iran to cut off its crude exports to the European Union earlier than July when an EU ban on Iranian crude takes effect also helped lift prices as it added to the geopolitical risk premium.
A rally on Wall Street, usually an alternative gauge by oil traders for energy demand, sputtered late in the day due to downbeat US home sales data, limiting the oil's gains, mostly for US crude.
In London, ICE Brent crude for March delivery settled up 98 cents at $110.79 a barrel, after hitting an intra-day high of $111.89. Front-month Brent gained after two days of losses.
"Brent was supported by Iran's statements about cutting off crude supplies in a preemptive move before EU countries can find alternative sources ahead of the sanctions, said Tom Bentz, director at BNP Paribas Prime Brokerage Inc in New York.
In Tehran, Iranian President Mahmoud Ahmadinejad said the European Union rather than his country will lose under new EU sanctions banning the import of Iranian oil by July 1. His remarks, part of a speech broadcast on state radio, came as Iranian lawmakers said they might cut supplies to the EU ahead of the July deadline.
Iran's parliament will debate on Sunday a bill that would oblige the government to halt oil exports ahead of the July deadline the EU had set.
EU's move, plus new US measures aimed at making it harder for countries to buy oil from Iran, Opec's second largest exporter, constitute the toughest sanctions yet aimed at pressuring Tehran to curb its nuclear program.
US March crude rose 30 cents to settle at $99.70, after having touched a session high of $101.39 early. The contract extended gains from Wednesday.
Brent's premium against US crude widened to $11.09 at the close, from $10.41 on Wednesday.
Brent crude's total trading volume rose 34% against its 30-day average, according to preliminary Reuters data. US crude's total trade volume was down 5% from the 30-day average.
Fed open to more stimulus
US Federal Reserve Chairman Ben Bernanke said on Wednesday the US central bank was ready to offer the economy additional stimulus after it announced it would likely keep interest rates near zero until at least late 2014.
Markets cheered the late 2014 timeframe for the first rate increase as it was much later than investors had expected and was widely seen as an appropriate step to further help speed the slow US economic recovery
The day's US economic reports were mixed, but a report from the US Commerce Department showing that new orders for US manufactured goods rose 3% in December pointed to more momentum in the economy as 2011 ended.
New US single-family home sales unexpectedly fell in December while jobless benefit claims rose moderately last week, putting some caution on the economic outlook.
On price downside risks, the outlook for crude supplies helped keep a cap on prices. Extra crude from Saudi Arabia, Iraq and Libya should make up for any Iranian oil lost through sanctions against Tehran for its disputed nuclear program.
Persistent worries about the health of Europe's economy fueled pressure as Greece's critical debt-restructuring negotiations with private lenders entered a new phase. The focus now is on how much the European Central Bank and other public creditors may need to contribute.
Oil futures rose in early trade as the dollar weakened following Wednesday's announcement from the Fed. Later on Thursday, the US dollar recouped some its losses, taking out some enthusiasm in buying riskier assets such as oil and other commodities.