Brent crude oil rose to around $114 per barrel today, supported by tight North Sea supplies ahead of the closure of a key UK oilfield for maintenance and on expectations of more demand before the northern hemisphere winter.
Britain's largest oilfield, Buzzard, which is the single biggest contributor to the Forties crude oil stream and usually sets the price of the Brent benchmark, will shut next month, suspending output until mid-October.
Production from key North Sea oilfields is due to fall by about 17 per cent in September, helping push up prices for nearby crude. But the shortfall should be temporary and traders expect pressure to ease after the maintenance is completed.
Brent for October was up 66 cents at $114.37 a barrel after falling more than $2 on Friday on expectations the USA might release some of its reserves. US light crude oil added 10 cents to $96.11.
Brent has risen about a third in two months, boosted by supply concerns and a dispute between Iran and the West over the Islamic Republic's nuclear programme.
Rhetoric from Israeli politicians has increased this month suggesting Israel might attack Iran's nuclear facilities ahead of US presidential elections in November.
Such an attack could bring about the closure of the Gulf of Hormuz, through which a fifth of the world's oil exports flow.
Senior Israeli officials have said no final decision about whether to attack Iran has been taken and the military hierarchy is unhappy about any attack without full US backing.
Oil demand has been sluggish this year because of the global economic slowdown, but with Europe and the US heading towards winter, low gasoil inventories may provide fundamental support to crude, Deutsche Bank analysts said in a weekly note.
Key to the outlook for fuel demand are expectations for economic growth, particularly in the world's largest oil consumer, the United States.
Investors are looking to the minutes of the last Federal Open Market Committee's (FOMC) meeting this week, which should provide clues to the Federal Reserve's view on economic growth and the chances of further monetary easing.
Federal Reserve Chairman Ben Bernanke will speak at a symposium in Jackson Hole, Wyoming on August 31 and had been expected by some analysts to set the scene there for a third round of quantitative easing (QE3).
However, the chances of QE3 have receded, economists say, as US economic data has improved, removing one possible support for oil and commodity prices.
Oil prices slipped last week after a source said the White House could tap the U.S. Strategic Petroleum Reserve to prevent high energy costs from undermining the success of sanctions against Iran.
But the idea was firmly rejected by the head of the International Energy Agency (IEA), the adviser to industrialised countries on energy policy, as well as Japan and South Korea.
Adding to market worries were incidents of unrest in the Middle East, specifically in Libya where a car bomb killed two people yesterday and an attack on a mosque in Yemen which killed seven.
