U.S. crude oil jumped by as much as $2 Thursday after a Malaysian airliner crashed over eastern Ukraine on the heels of fresh U.S. sanctions on Russia that had raised geopolitical concerns.
Prices were also buoyed by the prospect of increased European demand for refined products from the United States.
A Malaysian airliner was brought down over eastern Ukraine on Thursday, killing all 295 people aboard and sharply raising the stakes in a conflict between Kiev and pro-Moscow rebels, in which Russia and the West back opposing sides.
"The market could be seeing increased tensions between Russia, the European Union and the U.S.," said Andy Lipow, president of Lipow Oil Associates in Houston, Texas.
That could mean increased exports of diesel fuel from the U.S. Gulf to Europe, said Carl Larry, chief executive of consultancy Oil Outlooks in Houston, Texas.
"Our export market is going to benefit from any interruption of Russian refining. The thinking here is that we're going to have to make up some of the lost production that's going to Europe."
U.S. crude rose for a second straight session, gaining $1.99 to settle at $103.19 per barrel, its strongest showing since mid-June and its largest two-day climb since April. Brent for September, which became the front-month contract on Thursday, rose by 72 cents to $107.89.
On Wednesday, U.S. crude gained $1.24 after U.S. government data showed that rising U.S. refining activity caused crude stocks to fall by 7.5 million barrels last week, the biggest draw since January and larger than the 2.1 million drawdown forecast by analysts.
Geopolitical tensions are on the rise over Ukraine, with the United States imposing sanctions on some of Russia's biggest firms for the first time, including Rosneft, Russia's largest oil producer. Continued worries about the timing of exports from Libya and unrest in Iraq also underpinned the rise in Brent crude oil prices.