Brent crude rose for a sixth straight session to a four-week high Tuesday, boosted by concerns about gasoline supplies, optimism about fresh economic stimulus and the threat of fresh storms.
U.S. gasoline futures led the complex higher, rallying 3 percent, boosted in part by concerns about the slow return of some refinery operations following Hurricane Irene.
"The market is getting a little perturbed that refiners are not coming back quickly," said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.
Further support for prices came after Chicago Federal Reserve Bank President Charles Evans said he favored strong central bank accommodation for a substantial period of time, as the U.S. economy looks to be moving "sideways." Traders have been closely watching for any signs of more stimulus for the economy, which would spur investors into oil.
Crude got an additional boost following the release of notes from the Aug. 9 policy meeting showed the Fed considered a range of actions, including the unprecedented step of tying interest rate policy outlook to a specific unemployment level.
"The Fed minutes revealed they were inclined to do QE3 (quantitative easing) and this could be bullish for oil and commodities going forward," said Richard Ilczyszyn, senior market strategist, at MF Global in Chicago.
Brent crude traded up $2.14 to settle at a four-week high of $114.02 a barrel, breaking over the 50-day moving average. U.S. crude settled up $1.63 at a three-week high of $88.90 a barrel.
Trading volumes were 9 percent below the 30-day average for Brent and 10 percent below for U.S. crude.
U.S. RBOB gasoline futures rose 3 percent and heating oil 2 percent. Lift for RBOB came ahead of Wednesday's September contract expiration, the last contract of the year that covers summer-grade gasoline, Schork said.
Oil rebounded after being pressured by data showing U.S. consumer confidence in August fell to the lowest in more than two years.
The CME Group declared force majeure on Tuesday on the few remaining deliveries of its New York Mercantile Exchange August 2011 heating oil futures contract due to damage at a New York Harbor delivery facility caused by Irene.
Traders awaited the restart of Sunoco Inc's Gerard Point section of its 335,000-barrel-per-day (bpd) Philadelphia refinery, shut due to a flooded crude charge pump.
ConocoPhillips has begun the restart of its 238,000- bpd Linden, New Jersey refinery according to environmental filings with the state.
Nearly three million customers on the East Coast remained without power due to Hurricane Irene.
NEW STORM THREAT
The market was also cautious ahead of the strengthening Tropical Storm Katia in the Atlantic, expected to become a hurricane late Wednesday or early on Thursday.
Early models showed it missing the Hovensa refinery in St. Croix and passing north of Puerto Rico on Sunday morning.
Traders also reacted to a tropical wave over the northwestern Caribbean Sea, which was given a 10 percent chance of developing over the next 48 hours and could move into the western Gulf of Mexico, home to a large concentration of oil and natural gas facilities.
Traders also eyed reports of Israeli naval movements in the Red Sea. An Israeli military official said two additional warships had been stationed in the Red Sea but added that this was no more than routine.
He played down reports that they were connected to an Egyptian sweep of the Sinai peninsula for militants that has been reported in the Israeli media, although he declined to say what, if any, operational duties the ships were performing.
Prices reacted little in post-settlement trading to industry group the American Petroleum Institute data showing U.S. crude stocks rose 5.1 million barrels last week, though the report also showed stocks at the key Cushing, Oklahoma, delivery hub fell slightly.
Distillate stockpiles rose 276,000 barrels, but gasoline inventories fell 3.1 million barrels.
Ahead of the API report, a Reuters analyst survey yielded a forecast for crude stocks to be up 400,000 barrels, with distillates expected to be up 600,000 barrels and gasoline stocks seen down 1.1 million barrels.
The U.S. Energy Information Administration's weekly inventory report will follow at 10:30 a.m. EDT on Wednesday.
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