Brent oil rose towards $110 per barrel on Tuesday, reaching a three month high, supported by lower inventories, firm demand and concern turmoil in Egypt could disrupt supply.
Continue Reading Below
Brent crude gained 31 cents to $109.40 a barrel by 0919 GMT. U.S. oil added 12 cents to $106.44. It touched this year's high of $107.45 on July 11.
Brent oil has risen nearly $9 in the last three weeks and U.S. crude over $13 lifted by sharply falling U.S. crude oil stocks, an improving economic outlook and supply disruption.
"Global demand has picked up strongly, there are huge supply problems at a time when refineries are increasing output," said Amrita Sen, analyst at Energy Aspects.
She pointed to production disruption in Libya, which has been hit by protests and in Nigeria which has been affected by oil theft leading to the lowest output in years.
Investors are watching the unfolding regime change in Egypt, where the head of the emergency services said seven were killed and 261 wounded in overnight clashed between supporters of the ousted president, Mohamed Mursi and their opponents.
Continue Reading Below
Testimony on Wednesday from Federal Reserve Chairman Ben Bernanke will also be in focus. There is a view that the U.S. central bank will reduce its bond buying this year and scrap it by mid-2014.
The strength in oil, partly caused by speculative investors, could start to dampen demand, analysts said.
"There's a lot of speculative money in oil, but high gasoline prices are having a dampening effect as it is limiting consumer demand," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
Uncertainty about the demand outlook also prevented further strength.
German analyst and investor sentiment unexpectedly fell in July after a slew of negative data for Europe's largest economy, a survey showed on Tuesday.
The Asian Development Bank (ADB) on Tuesday lowered its growth forecasts for developing Asia this year and the next as a softer outlook for China meant subdued economic activity elsewhere in the region.
A day earlier, China said its second-quarter growth slowed.
U.S. commercial crude stocks likely fell 2 million barrels on average for the week ended July 12, a Reuters poll of eight analysts showed.
U.S. crude inventories plunged 20 million barrels over the previous two weeks, the deepest two-week draw on record, Energy Information Administration data showed on July 10. (Additional reporting by Manash Goswami in Singapore; editing by Keiron Henderson)