Oil prices rose more than 4 percent on Tuesday as geopolitical tension between Iran and the West reinforced fears about potential supply disruptions, while strong Chinese and U.S. economic data fueled optimism about global demand to start 2012 trading.
Iran threatened to act if the U.S. Navy moves an aircraft carrier back 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 the OPEC member'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 saber rattling are all contributing, Kilduff added.
China's big manufacturers narrowly avoided a contraction in December, but soothed fears of a slowdown.
Oil prices added to gains and Wall Street stocks rallied on data showing U.S. construction spending surged to a near 1-1/2 year peak in November and manufacturing activity grew at its fastest pace in six months in December, with new orders up also.
The euro rallied sharply while the dollar fell as the stronger-than-expected economic data increased risk appetite.
Brent February crude rose $4.75 to settle at $112.13 barrel, highest close since the November 15 settlement at $112.39.
U.S. February crude rose $4.13 to settle at $102.96 a barrel, having reached $102.88, highest close since May 10. Tuesday's $103.13 intraday peak was highest since prices reached $103.37 intraday on November 17.
Brent posted a 13 percent rise in 2011, while U.S. crude was rose 8 percent for the year.
Crude futures trading volumes were stronger after a couple of weeks of weak holiday-season volumes. Brent volume was 29 percent above its 30-day average, with U.S. volume 32 percent above its 30-day average.
U.S. heating oil also rose more than 4 percent and U.S. gasoline futures moved up on a boost from concerns that European refiner Petroplus
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.
THREATS TO OIL SUPPLY
Iranian state news agency IRNA quoted army chief Ataollah Salehi as saying Iran would take action if a U.S. aircraft carrier returned to the Gulf.
The Pentagon said it would keep sending carrier strike groups into the Gulf, despite the threat. The U.S. State Department said the threats were evidence the international pressure is beginning to bite.
The White House said they showed Tehran wants to divert attention from its deepening problems.
Iran's dispute with the West over its nuclear program was not the only potential threats to supply on investors radar.
Nigeria's president declared a state of emergency in parts of the north affected by an Islamist insurgency after a series of bombs set off on Christmas Day.
Adding to the turmoil, Nigeria's fuel subsidies were ended on Sunday and prompted unions to call for strikes and protests.
Internal sectarian tensions in OPEC-member Iraq since the departure of U.S. troops has added to fears about the region, though Iraq's crude oil exports climbed in December.
U.S. OIL INVENTORIES
Weekly reports on U.S. oil inventories will be delayed by Monday's holiday. U.S. crude stocks were expected to have fallen, with distillate and gasoline stockpiles up last week, according to a preliminary survey of analysts on Tuesday.
The industry group American Petroleum Institute's inventory data is due at 4:30 p.m. EST (2130 GMT) on Wednesday, with the U.S. Energy Information Administration data following on Thursday morning.
(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Alden Bentley and Marguerita Choy)