LONDON: Oil futures rose above $110 a barrel on Tuesday, on hopes that Europe would take further action to tackle its intractable debt crisis, while supply worries stemming from North Sea maintenance and Middle East tensions added further support.
The European Central Bank last week said it may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs, but details of how it will stabilise the bloc's bond markets have yet to be fleshed out.
"I do not think this strength is specific to Brent. Risk appetite is coming back to the market," said Eugen Weinberg at Commerzbank in Frankfurt.
"The market is waiting for more confirmation of the overall positive trend. Expectations are so low that it is unlikely there will be a surprise to the downside."
European shares tiptoed around four-month highs and the euro remained buoyant at $1.24 on Tuesday.
Brent crude for September delivery rose 80 cents to $110.35 a barrel by 0828 GMT, rising above $110 a barrel for the first time since mid May.
US crude firmed by 24 cents to $92.44.
Hopes that the United States and China - the world's top two oil consumers - will adopt stimulus measures to boost growth were also a positive for the oil market.
China will release from Thursday a deluge of data, ranging from industrial output to investment, which is likely to show the world's second-largest economy is, at best, stabilising.
"We're looking for some consolidation on industrial production before it starts improving again," said Ben Le Brun, a Sydney-based market analyst at OptionsXpress.
Violence in Syria and Iran's dispute with the West over Tehran's nuclear programme continued to keep investors worried about the potential threat to oil supply from the region.
Syria's prime minister fled on Monday as fighting continued, while a pipeline explosion halted Iraqi crude exports to Turkey.
Delays on exports of Iraqi Kirkuk, an alternative to embargoed Iranian crude, had already reached nearly 20 days after the Kurdish Regional Government (KRG) stopped adding its output to the flow due to an on-going payment dispute with the central government in Bagdhad. The KRG was due to restart exports in August.
TIGHTER NORTH SEA SUPPLY
Expectations of a sharp fall in output from the North Sea's second-largest crude oil stream in September has kept the September Brent price sharply higher than October, a market condition known as backwardation and points to strong prompt demand.
North Sea Brent crude oil loadings will fall to around 100,000 barrels per day (bpd) in September, down from 116,000 bpd in August.
In North America, investors were also watching Tropical Storm Ernesto, which is forecast to move into the southern part of the Gulf of Mexico by Thursday, but it was too early to know if it could disrupt oil and gas operations in the Gulf.
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