Oil prices rose above $100 a barrel on Tuesday, tracking gains in regional stock markets after European leaders took measures to battle the debt crisis.
By early afternoon in Europe, benchmark crude for February delivery was up $1.29 at $100.07 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 78 cents to finish at $98.78 on Monday.
In London, Brent crude was up $1.61 to $112.36 on the ICE Futures exchange.
European leaders agreed Monday on a new treaty to stop overspending, a key step to prevent a repeat of the crippling debt crisis and restore investor confidence in the region. They also pledged to stimulate growth and employment amid fears of a looming recession. Greece and its bondholders, meanwhile, are inching closer to a deal to significantly cut the country's debt and pave the way for it to receive a much-needed second bailout package.
"The announcements in the eurozone helped ease concerns but crude prices are going to be choppy going forward. The market is grappling with a weaker demand scenario and uncertainties in the supply side coming from Iran," said Natalie Robertson, commodities analyst at ANZ Banking Group in Melbourne.
Iran has welcomed international weapons experts into the country in hopes of refuting claims that it is building a nuclear weapon. That eased concerns about possible military action in the region.
Still, Europe plans to embargo Iranian oil this summer to pressure it about its nuclear program. If that happens, Iran says it could retaliate by blocking passage through the Persian Gulf, where tankers carry one-sixth of the world's oil exports.
The U.S. is ready to implement sanctions on Iran's central bank that will make it harder for Iran to sell oil. India has however, joined China in saying it will not cut back on crude imports from Iran.
A weaker dollar also helped boost oil prices by making the commodity cheaper for investors holding other currencies. The euro was up to $1.3181 from $1.3114 late Monday in New York.
Investors will be monitoring fresh information due later on U.S. stockpiles of crude and refined products.
Data for the week ending Jan. 27 is expected to show builds of 3 million barrels in crude oil stocks and 1 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.
In other energy trading, heating oil rose 4.03 cents to $3.0781 per gallon and gasoline futures were up 1.76 cents to $2.8903 per gallon. Natural gas fell 10.3 cents to $2.61 per 1,000 cubic feet.
Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.