Oil prices rose more than 3 percent on Tuesday as tension between Iran and the United States and Europe kept fears of potential supply disruptions in focus, while strong Chinese and U.S. data fuelled optimism about the global economy at the start of 2012 trading.
Iran threatened to act if the U.S. Navy moves an aircraft carrier into the Gulf, the most aggressive statement yet from Tehran after weeks of sabre-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 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 Wall Street stocks jumped 2 percent 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. <.N>
The euro rallied sharply while the dollar fell as the stronger-than-expected economic data whetted appetite for risk.
Brent February crude rose $3.70 to $111.08 barrel by 12:40 p.m. EST (5:40 p.m. British time), having reached $111.58, highest intraday price since December 5.
U.S. February crude rose $3.65 to $102.48 a barrel, having reached $102.88, highest since reaching $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. During the noon hour in New York, Brent volume was nearly 2 percent above its 30-day average, with U.S. only 3 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 efforts by 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.
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 Iranian semi-official Fars news agency quoted Salehi as recommending and warning the United States against the return of the carrier: Iran will not repeat its warning.
The escalating tensions between Iran and the West over its nuclear program were 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 and following a series of bombs set off across Nigeria on Christmas Day.
Adding to the turmoil, authorities scrapping fuel subsidies on Sunday prompted unions in Nigeria to call for strikes and protests.
Internal sectarian tensions in OPEC-member Iraq since the mid-December departure of U.S. troops has added to fears about disrupted oil supply, though Iraq's crude oil exports climbed to 2.145 million barrels per day in December, from 2.135 million bpd in November.
(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Marguerita Choy and David Gregorio)