Oil prices rose on Tuesday on a report of a jump in US consumer confidence, an Italian bond auction attracting demand and after an attack by Iranian protesters on two British embassy compounds in Tehran. Investor relief after Italy managed to sell bonds, though borrowing costs hit euro lifetime peaks, pushed oil higher, with the debt auction coming hours before Italy's new prime minister was to meet eurozone finance ministers to set out economic reform plans.
US consumer confidence rose from a 2-1/2 year low in November as apprehension about job and income prospects eased, according to a private sector report. "A combination of the geopolitical risks related to the Iranian situation and the positive US consumer confidence data have boosted oil futures," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
With tensions over Iran's controversial nuclear program recently raising the geopolitical fear premium for oil, Iranian protesters stormed two British Embassy compounds in Tehran in a protest against sanctions imposed by Britain. An Iranian lawmaker had warned on Sunday that angry Iranians could storm the British Embassy as they did the US mission in 1979.
"The situation has ratcheted up on the UK Embassy storming," said John Kilduff, a partner at Again Capital LLC in New York. "The situation has been growing more tense and this is certainly an agent provocateur with stakes as high as they can be in terms of global oil supplies." ICE Brent January crude at $110.82 a barrel, gaining $1.82, or 1.67 percent. US January crude settled at $99.79 a barrel, rising $1.58, or 1.61 percent, having reached $100.06, but still below Monday's $100.74 high.
Brent crude trading volumes outpaced those for US crude, already above half million lots traded and only 6 percent under its 30-day average. US volumes were 40 percent below the 30-day average. The Brent premium to its US counterpart moved above $11 a barrel intraday. In addition to the Iranian situation, Syria continued to keep investors wary of the tenuous stability in the Middle East and Africa and the potential for a sudden supply interruption.
Turkey said it did not want military intervention in Syria but was ready for any scenario to deal with President Bashar al-Assad's crackdown on popular unrest. Oil prices also received support from Sudan's decision to halt the South Sudan's oil exports over a transit fee dispute.
The euro advanced for a second straight session on speculation the European Central Bank could lend money to the International Monetary Fund to help Italy cope with the debt crisis. The dollar index weakened, adding lift for dollar-denominated commodities like oil.
Euro zone ministers struggled to ramp up the firepower of their rescue fund and looked to the IMF for more help on after Italy's borrowing costs hit a euro lifetime high of nearly 8 percent. Investors awaited weekly oil inventory reports on US supply, with the industry group American Petroleum Institute's report due at 4:30 pm EST (2130 GMT) on Tuesday. Crude oil and gasoline stocks were expected to have risen last week, with distillate stocks lower, according to a Reuters survey of analysts on Monday.