Oil hit 115 dollars a barrel on Monday for the first time in more than three months, as concern about supplies trumped signs of weakening fuel demand.
Supply of the North Sea crude underpinning the Brent crude contract was set to hit a record low.
Sanctions have curbed Iranian output, while an intensification of debate in Israel on whether to go to war with Iran over its nuclear work added to concerns about disruption of Middle East supply.
Brent crude rose as high as 115.11 dollars a barrel, the highest since May 4. U.S. oil rose 90 cents to 93.77 dollars.
“The likelihood of some sort of intervention to stimulate economies is supporting the market,” said Christopher Bellew, an oil broker at Jefferies Bache in London.
“Also the North Sea, Iran and the Middle East are still a factor.”
Supply-side concerns countered forecasts of weakening oil demand, which have weighed on prices.
The International Energy Agency on Friday cut its 2013 oil demand forecast by 400,000 barrels per day, citing a slowdown in global economic activity.
“We are seeing prices rise despite weak growth outlook numbers on Friday,” said Ben Le Brun, a Sydney-based market analyst at OptionsXpress.
“The Israeli comments, what you see in Israeli media, is a concern. A major concern.”
Prime Minister Benjamin Netanyahu said on Sunday that most threats to Israel’s security were dwarfed by the prospect that Iran could obtain nuclear weapons.
Local media reports said that Tehran had stepped up its efforts to achieve its ambition.
An increase in bets by financial investors on rising prices is reinforcing the upward trend, Commerzbank said.
Speculators raised their net long positions – bets that prices will rise – in Brent for a second week, data showed on Monday.
“The market is decoupling from fundamentals,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
“Hopes of fiscal stimulus from the Federal Reserve, China and Europe are underpinning prices for oil and other commodity markets.”
Brent in particular is being supported by a drop in output, sending the price of immediate supplies to a widening premium to oil for delivery later, a structure known as backwardation.
On Monday, the premium at which the nearby Brent contract, currently September, trades against the second month jumped to 2.02 dollars, the highest since October 2011.
“The backwardation in Brent is very big. I think that’s because of the North Sea,” Bellew said.
Supply concerns and the prospect of more government stimulus are likely to support a continued premium for prompt supplies, analysts at Bank of America Merrill Lynch said in a report.
“Exacerbated by the recent structural supply shortage in the North Sea, Iran and other countries, we could see a period of super-backwardation.
“We also believe that further unconventional monetary easing will likely keep prices supported.” (Reuters/NAN)