NEW YORK: Brent oil rose on Tuesday, hovering at a two-week high, as conflict in South Sudan threatened the country's oil output at a time when production cuts in Libya are already curbing global supply.
Amid the uncertainty, traders bought back contracts to cover short positions ahead of the Christmas holiday on Wednesday, which drove U.S. and European prices up in light holiday trade.
"There's a rule of thumb; you really don't want to go home short with what's going on," said Rich Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.
The situation in South Sudan "is going to put a potential crunch on supply in the short term," he said.
U.S. gasoline futures supported oil prices, trading up 1.24 percent, after reaching a 15-week high in the previous session. Refinery snags in the United States and striking refinery workers in France thinned supply while demand remains robust.
New York Mercantile Exchange trading will close an hour early on Tuesday at 1:30 p.m. EST (1830 GMT) for Christmas Eve. By midday, trading in U.S. and Brent oil fell off and prices were virtually unchanged from earlier in the session.
Brent oil rose 43 cents to $111.99 a barrel by 12:03 p.m. EST (1703 GMT), after matching the Dec. 6 high of $112.06. U.S. oil futures edged up 33 cents to $99.24, above the 200-day moving average of $98.89.
U.S. gasoline futures reached a 15-week high of $2.8174 per gallon within fractions of a penny of the 200-day moving average of $2.8176. The contract was last trading 1.24 percent higher at $2.8148.
The crack, or difference, between U.S. crude oil futures and gasoline continued to widen after rising to a three-week high in the previous session. It last traded at $19.03 per barrel.
West Texas Intermediate (WTI) crude, the U.S. benchmark, is up about 8 percent for the year, while the gap with Brent widened to almost $20 earlier this year, as more pipelines diverted oil from the contract's delivery point in Cushing, Oklahoma, reducing a supply glut.
The spread between the two oil benchmarks was last trading at $12.79 per barrel, slightly wider than the previous session's settlement.
South Sudan's production has fallen by 45,000 barrels per day (bpd) to 200,000 bpd after oilfields in Unity state shut down due to fighting.
The United Nations could nearly double the size of its peacekeeping force in South Sudan, while rebel leader Riek Machar and President Salva Kiir indicated they were ready to try to end a deepening conflict that has killed hundreds of people.
The disruption to Sudanese oil supply adds to Libya's production cut of more than 1 million barrels per day as its key oil ports stay shut.
Despite the violence and tensions in Africa, Brent is on track to close flat this year from 2012 amid a well supplied market and slower growth of fuel demand in China, despite outages in Iraq, the North Sea and Libya.
Traders will be scouring U.S. oil inventory data to gauge supply. U.S. crude oil stockpiles likely fell for the fourth straight week last week, while gasoline inventories saw a preliminary rise, a Reuters poll of analysts showed on Monday.
The API will release its data at 4:30 p.m. EST (2130 GMT) on Tuesday while the U.S. Energy Information Administration will publish its data on Dec. 27 at 11:00 a.m. EST due to the closure of the federal government on Wednesday for Christmas.