Oil rose on Monday in choppy trading, reversing an initial price slide following news that U.S. forces killed al Qaeda leader Osama bin Laden.
Brokers and analysts said bin Laden's death, which lifted the U.S. dollar, did not alter the factors that pushed the greenback to three-year lows against a basket of currencies last week or the turmoil in Africa and the Middle East that has supported oil prices.
Despite the initial market impact on oil prices, there's really no significant impact here on oil production or transit, said Ian Bremmer, the president and founder of Eurasia Group.
Al Qaeda's prominence in Yemen and Saudi Arabia never meaningfully threatened Saudi oil production; so no change with Bin Laden's death.
Further support came after Iran state television reported that Israeli military aircraft were massing at a U.S. base in Iraq. The Pentagon on Monday dismissed the report as ridiculous and Israel said it had no knowledge of such a plan.
Brent crude for June was up 10 cents to $125.99 a barrel at 10:44 a.m. (1444 GMT), after sliding to $121.67. Brent's 2011 peak of $127.02 was reached on April 11.
U.S. crude for June rose 37 cents to $114.30, reaching $114.65, the highest intraday price since hitting $130 on September 22, 2008. Crude bounced after falling as low as
Both Brent and U.S. crude oil prices initially suffered multi-dollar retreats on the news of bin Laden's death as the dollar received a boost from the U.S. military success.
Bin Laden was killed in a U.S. helicopter raid on a mansion near the Pakistani capital Islamabad, officials said, ending a nearly 10-year worldwide hunt.
Fears that bin Laden's killing might trigger a violent response by al Qaeda or other supporters were reinforced when the Pakistani Taliban threatened attacks against government leaders, including President Asif Ali Zardari, the Pakistan army and the United States.
The closest al Qaeda has been to hitting the oil industry was in February 2006, when Saudi forces repelled a suicide attack on the Abqaiq oil-processing center.
(Additional reporting by Gene Ramos in New York, Christopher Johnson in London and Alejandro Barbajosa in Singapore; Editing by Alden Bentley)