Oil rose above $111 per barrel on Tuesday, supported by a bailout payments deal for Greece although worries over a looming U.S. fiscal crisis kept a lid on gains.
Optimism spread throughout financial markets, with European shares at a near three-week high after global lenders clinched a deal to reduce Greek debt and disburse the country's next aid instalment.
Continue Reading Below
Brent crude was up 14 cents at $111.06 a barrel by 1240 GMT, having reached a high of $111.36 in earlier trade. U.S. crude was up 20 cents to $87.94.
"This serves to increase risk appetite, which should attract investors to the oil market," Commerzbank analysts wrote in their morning report.
Oil dealers cautioned that price gains may be limited due to the fragility of the world economy. The OECD cut its global growth forecasts on Tuesday, saying the euro zone debt crisis is the greatest threat to the world economy.
Analysts said the gloomy growth outlook from the Organisation for the Economic Cooperation and Development suggests that oil market forecasters should cut oil demand growth estimates even further.
"Any more negativity coming from the global economy will only result in oil demand growth slowing even further than what has already been forecast," said Dominick Chirichella of New York's Energy Management Institute.
Market attention was expected to focus on the fiscal policy standoff in the United States. A lack of progress on that front will muddy the outlook for demand from the United States, the world's top oil consumer.
Republicans in the U.S. Congress on Monday called on President Barack Obama to detail long-term spending cuts to help solve the country's fiscal crisis, while holding firm against the income tax rate increases for the wealthy that Democrats seek.
Investors also kept watch on the political crisis in Egypt that has triggered concern about potential supply disruptions.
Opponents of Egyptian President Mohamed Mursi rallied in Cairo's Tahrir Square for a fifth day on Tuesday, stepping up calls to scrap a decree they say threatens Egypt with a new era of autocracy.
Traders also awaited weekly U.S. inventory data due out on Tuesday and Wednesday. Analysts forecast a build in crude and refined product stockpiles for the week to Nov. 23.