Instability in Egypt and Libya bolstered crude oil on Tuesday, with U.S. oil zeroing in on $100, eventually settling above $99, as supply concerns stemming from geopolitical turmoil momentarily overrode fears about the global economy.
Benchmark crude for August delivery gained $1.61, or 1.6 percent, to close at $99.60 a barrel in New York after rising as high as $99.87. Oil last crossed $100 a barrel on Sept. 14 of last year.
Brent crude futures for August delivery rose by more than $1 to trade near $104 a barrel, extending the previous day's rally.
A Libyan official made an announcement on Tuesday that incessant disruptions to that country's oil sector could cripple Libya's economy and choke off state revenue. New protests have shut down several Libyan oilfields in the last week.
Meanwhile, encouraging U.S. data has helped put a floor under crude. The world's largest energy consumer has seen a run of encouraging data, a streak that continued on this week after the Institute for Supply Management said manufacturing sector expanded last month.
The relative resilience of the U.S. economy has converged with an energy boom that is leading to increased U.S. oil production, and causing a sharp narrowing in the differential between U.S. oil and Brent, the international benchmark. On Tuesday, the two contracts converged to less than $5, with West Texas Intermediate flirting with its highest levels in more than nine months.
"It's definitely a big issue," said Richard Hastings, macro strategist at Global Hunter Securities. He added that investors are pricing a risk premium into Mid-East instability into U.S. oil, while Brent is being hindered by ongoing jitters about the global economy stemming from China.
"The essence of what's happening is that US produced crude oil is geographically and geopolitically secure, while Brent continues to reflect macroeconic weakness." If Egypt grows more unstable, "you will see something close to convergence," he added.
Egypt Roils Markets
In Egypt, President Mohamed Morsi rebuffed an ultimatum from the army to resolve the widening opposition to his government, which comes barely two years after longtime strongman Hosni Mubarak was ousted in a wave of similar protests. In late trading, a report said the Egyptian Army would suspend the constitution -- effectively ousting Morsi's government -- if a deal could not be reached.
U.S. oil has also been helped by resolved bottlenecks in Cushing, Oklahoma region, a key delivery hub for WTI. Analysts also point to the recent re-start of BP's Whiting refinery.
"While the costs to ship crude via pipelines suggest the current spread is near pipeline economics, a rapid draw in Cushing inventories could push the spread even below that," said Goldman Sachs in a research note. "While the risks in the near term are clearly to the upside (narrower WTI-Brent spread), we believe the risk/return trade-off becomes less attractive going forward," they added.
—Reuters and AP contributed to this article.