Brent crude rose near six-month highs above $117 on Thursday as commodities firmed on expectations that a deal on Greek debt was nearer, and concerns about cold weather in Europe and Middle East disruption supported oil.
Front-month Brent was up 42 cents to $117.62 a barrel by 1202 GMT (7:02 a.m. EST), paring gains after reaching an intra-day high of $118.17 a barrel earlier in the session and adding to several days of gains.
U.S. crude added 67 cents to reach $99.38 a barrel in its third day of increases.
Investors expected Europe to approve a plan to resolve Greece's debt crisis even as Athens failed to agree on a package of austerity measures.
Keeping oil prices higher are the evolving geopolitical situation in and around the Middle East ... in particular Iran, the bitter cold winter weather that has hit major portions of Europe driving up demand for heating fuels as well as more signs that a Greek deal may be close to finally getting done, Dominick Chirichella from the Energy Management Institute said in a note.
A cold spell in Europe has lent support to the energy complex, with gas and electricity grids in southern Europe near breaking point.
But traders said demand for heating oil had remained relatively subdued, and the February ICE gasoil future has been unable to break over the technical $1,000 per tonne mark on a closing basis.
Away from political worries, analysts say that further injections of long-term liquidity into European banking are helping assuage fears about the sector and stimulating speculative positions on crude contracts.
Monetary excess liquidity has been easing financial distress in the European banking sector, so we won't have a banking crisis this year, while interest rates have been dropping for Italy and Spain, DnB NOR oil analyst Torbjorn Kjus said. This is making it easier for speculative money to build up positions in crude.
All eyes will be on what the European Central Bank is willing to do to help Greece when it holds its monthly policy meeting on Thursday, with interest rates expected to stay on hold ahead of a major funding operation later this month.
Middle East tensions escalated as armored reinforcements poured into the Syrian city of Homs, while Iran has renewed a threat against the United States.
Brent's premium against U.S. crude was over $18 on Thursday. It touched an intraday high of $20.71 on Tuesday, the widest since October.
CHINESE INFLATION, DEMAND OUTLOOK
Overnight data from China showed inflation fighting will remain a key topic this year for the world's second-largest oil consumer after the inflation rate accelerated to 4.5 percent in January, ahead of market expectations.
World oil demand will rise more slowly than expected this year, according to the OPEC's latest monthly report, hit by the euro zone debt crisis and high retail prices. The cartel cut its forecast for world oil demand growth in 2012 by 120,000 barrels per day (bpd) to 940,000 bpd.
Worries about the U.S. economy, along with the EU debt problem, are adding more uncertainty to world oil needs over the next 12 months, the report said. Firming retail petroleum prices are expected to have a negative impact on oil demand across the globe.
Investors also await forecasts for global oil demand from the International Energy Agency on Friday.
The U.S. EIA this week raised its 2012 and 2013 forecast for global oil demand growth and said supply would tighten as gains in non-OPEC output lag, adding support to oil futures.