Oil prices rose past $101 a barrel Monday amid growing tensions between Iran and Western powers, efforts in Europe to contain its debt crisis and signs the U.S. economy is improving.
By early afternoon in Europe, benchmark crude for January delivery was up 51 cents to $101.47 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 76 cents to settle at $100.96 on Friday.
In London, Brent crude was up 73 cents at $110.67 on the ICE Futures exchange.
Tensions have been building for weeks over Iran's nuclear program. The country is the world's third-biggest oil exporter, shipping 2.2 million barrels of crude per day, and escalating sanctions or an armed conflict could threaten exports leaving the Persian Gulf.
The U.S. Senate voted on Friday to impose new sanctions on Iran's central bank, barring foreign financial institutions that do business with the bank from opening operations in the U.S.
On Sunday, Iran's official IRNA news agency reported that the country's armed forces shot down an unmanned U.S. spy plane that violated Iranian airspace. The U.S. has not confirmed the report.
"The situation in Iran is unlikely to get better any time soon," Barclays Capital said in a report. "Retaliationary efforts from Iran are also feared given its influence over oil trade flows through the Strait of Hormuz."
Crude has jumped from $75 during the last two months amid signs the U.S. economy will likely avoid a recession. Investors were cheered by the Labor Department's November jobs report Friday that showed the economy added 120,000 jobs last month and the unemployment rate fell to 8.6 percent from 9.0 percent.
Markets also remained hopeful that European leaders will agree on measures to counter the expanding government-debt crisis at a Friday summit in Brussels.
The high indebtedness of countries like Greece, Italy, Spain has raised speculation about the future of the euro currency and fueled fears about a financial collapse and its negative effects on oil demand.
In other Nymex trading, natural gas fell 2.3 cents to $3.561 per 1,000 cubic feet. Heating oil added 3.06 cents to $3.0206 a gallon and gasoline futures gained 1.62 cents to $2.6324 a gallon.
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Alex Kennedy in Singapore contributed to this report.
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