Oil prices surged on Tuesday, with U.S. crude hitting the highest settlement since May, fueled by strong economic data from the United States and China and mounting concern about supply disruption from Iran.

Brent crude jumped $5 in late activity as markets latched on to data showing U.S. construction spending near a 1-1/2 year peak in November and China manufacturing data that eased concerns of a slowdown in the world's No. 2 oil consumer.

Tuesday's gains on the first day of trading in the new year added to Brent's 13 percent rise in 2011, with support in recent weeks coming from Iranian threat's to choke of crude oil shipments through the strategic Strait of Hormuz in Tehran's ongoing standoff with the West.

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. <.N>

Brent February crude rose $4.75 to settle at $112.13 barrel, the highest close since the November 15 settlement at $112.39. It reached as high as $112.44 a barrel in post-settlement activity.

U.S. February crude rose $4.13 to settle at $102.96 a barrel, the highest close since May 10, after reaching a high of $103.37 earlier -- the highest intraday level since November 17.

Crude futures trading volumes rebounded after two weeks of thin holiday trading. Brent volume climbed 29 percent above its 30-day average, with U.S. volume 32 percent above its 30-day average.

U.S. heating oil jumped more than 4 percent and U.S. gasoline futures gained after European refiner Petroplus

announced it may have shut down 3 refineries, with combined throughput capacity of nearly 340,000 barrels per day (bpd), after the company was hit by a credit freeze.

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 the three plants.


Tensions between the West and Tehran, which stem from Iran's nuclear program, rose further as new U.S. and European Union financial sanctions began to take a toll on the OPEC member's economy.

Iran last week threatened to cut of oil shipments through the Strait of Hormuz, through which 35 percent of seaborne oil shipments travels. Iran on Tuesday threatened to act if the U.S. Navy carried through with plans to send an aircraft carrier back into the Gulf.

Trouble in fellow OPEC member added to oil market supply concerns. 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.

In addition, Nigeria's fuel subsidies were ended on Sunday and prompted unions to call for strikes and protests.


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; Marguerita Choy, Matthew Robinson and David Gregorio)