LONDON: Oil prices rose more than $1 per barrel on Tuesday on supply worries and on hopes jumping as much as $3.15 to a high of $113.90 before easing back to trade around $112.25 by 1250 GMT, on course for a rise of more than 4 percent in January.
US March crude jumped $1.91 to a high of $100.69, before slipping back to trade around $100.15.
"Prices are moving upwards with general sentiment as stock markets strengthen and as the dollar eases," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.
"Supply worries are preventing a price drop, despite the fact that markets are oversupplied. As long as these supply risks remain in play, prices are unlikely to drop much below where they are now, and Brent should not stray too far from $110," Fritsch added.
Brokers said high volatility was caused by computer-driven trading. A surge in volume had occurred as the Brent market went through a key buying level identified by one automated system.
"A big stop position was triggered," said one trader. "Just below 3,000 lots traded during that minute. No conspiracy ... just people sometime make expensive mistakes."
The oil market also gained support from across-the-board rises in stock markets after Greek Prime Minister Lucas Papademos raised hopes a deal would be reached this week to avoid a potentially chaotic debt default.
Luxembourg's Finance Minister Luc Frieden said Greece and its private creditors were close to a debt restructuring deal.
The dollar fell 0.3 percent against a basket of major currencies, remaining under pressure after the US Federal Reserve said last week it was likely to keep interest rates near zero at least until late 2014.
Dollar-denominated oil becomes cheaper to holders of other currencies when the greenback weakens.
Lawmakers on the US Senate Banking Committee plan to vote on a new round of sanctions targeting Iran's energy sector. The package comes on the heels of new banking sanctions that the Obama administration is only beginning to implement as well as tough new embargos by European nations.
"Iran will make sure we see more upside than downside," said Jeremy Friesen, a commodity strategist at Societe Generale.
South Sudan kept oil production shut even as Sudan released four tankers loaded with South Sudanese oil to try to defuse a row over export transit fees.
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