NEW YORK Brent crude oil futures rose on Tuesday for the fifth straight session, on news of an alleged Iranian plot to assassinate Saudi Arabia's ambassador in the United States.
Before the news, oil markets had traded higher in line with equities markets, which later eased off highs. Then, crude found support on news of the alleged plot as well as on U.S. East Coast refinery problems that raised supply concerns.
Analysts said the alleged plot could reintroduce a risk premium to crude prices which had not been seen since the United States and other producer nations released strategic oil inventories over the summer.
"This is the kind of thing that can move the market like nothing else," said Richard Ilczyszyn, senior market strategist at MF Global in Chicago, noting oil markets carried a strong risk premium for much of the first half of the year due to the Arab Spring.
Tensions between Saudi Arabia and Iran rose at the last OPEC meeting when Tehran resisted a Saudi plan to increase oil production to help counter disruptions to Libyan crude and bring down prices.
Brent crude's five-day gain of nearly 11 percent was the biggest since August 2009 and marks a sharp rebound from the eight-month low close below $100 just a week ago. Further support for prices came as the euro gained against the dollar, bolstering commodities denominated in the greenback.
In London, ICE Brent crude for November delivery settled at $110.73 a barrel, gaining $1.78, after hitting a session high of $111.15, the highest since September 21, from the early low of $107.45. In five days, it had gained $10.94, or 10.96 percent.
U.S. November crude settled 40 cents at $85.81, after rising to the day's high of $86.64 from the early low of $83.97. In five sessions, U.S. crude has risen $10.14, or !3.4 percent.
Both Brent and U.S. crude have broken above their 50-day averages in the recent days, adding to bullish sentiment.
Trading volume for Brent was heavy, hitting nearly 660,000 contracts, 15.7 percent above its 30-day average. U.S. crude volume was more than 681,000 contracts, 2.5 percent above its 30-day average.
U.S. crude also found support on rallying gasoline futures after trade sources said Sunoco shut a fluid catalytic cracker unit at its Marcus Hook, Pennsylvania plant.
"The euro rallying and the U.S. gasoline's rally have helped pushed oil prices up," said Mark Anderle, trader at TAC Energy in Dallas, Texas.
Crude futures fell sharply in early trade on worries over the health of Europe's economy as its top financial watchdog said the euro zone's sovereign debt crisis threatened global economic stability.
World oil demand may be more robust that expected, as consumption in Asia and the Middle East is holding up and even with the slowdown in economic growth in the United States and Europe, said Fatih Birol, chief economist of the International Energy Agency.
Earlier, OPEC, which pumps a third of the world's oil, cut its global oil demand growth forecast for a fourth consecutive month on Tuesday, citing the downturn in developed countries and efforts by China and India to curb fuel use.
OPEC cut its forecast of global oil demand growth this year by 180,000 barrels per day (bpd) to just 880,000 bpd. Next year it sees oil demand growing slightly faster -- by 1.19 million bpd, down 70,000 bpd from its previous estimate in September.
A Reuters poll ahead of weekly inventory reports showed analysts expected U.S. crude stockpiles rose 300,000 barrels last week on higher imports and lower refinery utilization rates.
Distilate stocks fell 600,000 barrels and gasoline supplies dipped 100,000 barrels, the poll also showed.
(Additional reporting by Christopher Johnson in London; Florence Tan in Singapore; Editing by Alden Bentley and David Gregorio)