U.S. light, sweet crude futures for August delivery got a boost Tuesday from their European oil counterpart, recovering from earlier losses and settling at $79.36 a barrel, up 15 cents.
The jump followed choppy trading throughout the day in U.S. futures, even as Brent futures rose substantially. Brent settled at $93.02 a barrel, up $2.01, or 2.2%, after earlier hitting $93.17.
Carl Larry, an analyst with Oil Outlooks & Opinions in Houston, attributed the jump in West Texas Intermediate to the increase in Brent and to renewed optimism that an upcoming euro-zone summit could yield a breakthrough. Larry also cited renewed tensions between Syria and Turkey as a factor in the rally.
The increase is "following along on anticipation of bigger and better things tomorrow," said Mr. Larry. "We're looking for a shred of hope" on Europe, he added.
North Sea Brent crude oil was higher on concerns over tightening supplies due to a strike in Norway and the impending Europe Union embargo on Iranian crude-oil imports.
Traders said the gain was sparked by news of a widening impact of a strike by Norwegian oil workers. Analysts at J.P. Morgan warned the strike "has the potential to tighten the European light sweet-crude market, particularly as refinery runs increase following the spring maintenance period."
Brent also gained support from news South Korea said it would halt its import of Iranian crude oil indefinitely as of July 1.
The move comes as stricter sanctions on Iran are set to go into effect Sunday, including a ban of Iranian oil imports by E.U. nations.
Citi Futures analyst Tim Evans said the Norwegian strike situation would likely be a short-term hit to supply. More important to the long-term trajectory are relatively weak demand fundamentals, the continued flow of heavy oil output from Saudi Arabia, and the continued threat of worsening relations with Iran.
With the recent retreat, oil prices now trade at a viable level for both producers and consumers, Evans said.
"We're at a level that is at least in the ballpark of what could be considered fair value," Mr. Evans said.
Front-month reformulated gasoline blendstock, or RBOB, settled at $2.645 a gallon, down a fraction of a penny. Front-month futures for heating oil settled at $2.577 a gallon, up 3.8 cents.
Copyright (c) 2012 Dow Jones & Company, Inc.
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