Oil price rose more than 3 percent on Tuesday as tension between Iran and the United States kept fears of potential supply disruptions in focus and with Chinese and U.S. economic data also supportive at the start of 2012 trading.
Iran threatened to take action if the U.S. Navy moves an aircraft carrier into the Gulf, the most aggressive statement yet from Tehran after weeks of saber-rattling as new U.S. and European Union financial sanctions take a toll on Iran's economy.
The supportive economic data and the geopolitical concerns are furthering the crude oil rally, said John Kilduff, partner at hedge fund Again Capital LLC in New York.
The temperature is going up every day now on the Iran situation -- new sanctions, new missile launches, and sabre rattling are all contributing, Kilduff added.
China's big manufacturers narrowly avoided a contraction in December, but soothed fears of a slowdown. The official purchasing managers' index (PMI) complied for the National Bureau of Statistics rose to 50.3 in December from 49 in November.
Oil prices added to gains and stocks on Wall Street jumped 2 percent on data showing U.S. construction spending surged to a near 1-1/2 year peak in November and that manufacturing activity grew at its fastest pace in six months in December, with new orders up also. <.N>
Brent February crude rose $3.37 to $110.75 a barrel by 11:38 a.m. EST (4:38 p.m. British time), having reached $111.58, a strong start to the year after Brent posted a 13 percent rise in 2011.
U.S. February crude rose $3.40 to $102.23 a barrel, having reached $102.88. U.S. crude posted an 8 percent rise in 2011.
Crude futures trading volumes were stronger after weak holiday volumes the past couple of weeks. Both U.S. and Brent dealings had surpassed 340,000 lots traded approaching midday in New York. Brent volume was only 7 percent below its 30-day average, with U.S. 18 percent under its 30-day average.
U.S. heating oil rose sharply, keeping pace with crude on a percentage basis, and U.S. gasoline futures also moved up as oil analysts and brokers eyed European refiner Petroplus'
A pan-European group of unions has called on governments in Britain, France, Belgium and Switzerland to step in and support employment at Petroplus refineries threatened with closure.
Workers at the Petroplus Petit Couronne refinery in France will meet union representatives from nearby refineries on Wednesday to decide whether to call for strike action after temporary shutdowns announced for three plants.
(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Marguerita Choy)