Oil prices rose to $96 a barrel Tuesday as concerns about Iran's nuclear activities outweighed uncertainty about how Italy will handle its mounting sovereign debt crisis.
By early afternoon in Europe, benchmark crude for December delivery was up 56 cents at $96.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.26 to settle at $95.52 in New York on Monday.
In London, Brent crude was up $1.22 at $115.78 a barrel on the ICE Futures exchange.
Crude has jumped from $75 on Oct. 4, when hopes grew that Europe will be able to at least temporarily contain its sovereign debt crisis. Worries have come back to haunt Europe, however. Doubts about Italian Prime Minister Silvio Berlusconi's ability to enact cost-cutting reforms and the strength of his leadership have investors on edge again.
"Market participants are anxiously awaiting a vote in Italy (Tuesday) on whether Berlusconi will remain in power and implement austerity measures," said a report from JBC Energy in Vienna.
Italy is the eurozone's third-largest economy and budget cuts needed to help state finances would likely slow economic growth.
"As the eurozone goes deeper into austerity we will have to keep a very negative view on economic and oil demand for Europe," said Olivier Jakob of Petromatrix in Switzerland.
Helping to sustain crude prices were expectations that a report to be released Wednesday by the International Atomic Energy Agency is likely to contain evidence about Iran's nuclear weapons program.
"Leaked information suggests Iran is seen as geared to developing nuclear weapons, which could increase the risk of a military attack on Iran's nuclear facilities," said analysts at Commerzbank in Frankfurt. "We believe this justifies a certain risk premium on the price of oil."
Commodities have also rebounded in recent weeks on signs that the U.S. economy has avoided a recession this year.
Barclays Capital said in a report that lack of spare crude production capacity combined with still rising demand means that oil prices have the potential to rise strongly.
Yet some analysts expect global economic growth and crude demand to slow sharply next year, which would drag down oil prices. Capital Economics forecasts Brent to drop to $85 by the end of 2012 and to $75 by the end of 2013.
Investors will be monitoring fresh information on U.S. stockpiles of crude and refined products.
Data for the week ending Nov. 4 is expected to show a build of 1 million barrels in crude oil stocks and a draw of 400,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration ? the market benchmark ? will be out on Wednesday.
In other Nymex trading, heating oil rose 2.78 cents to $3.1476 per gallon and gasoline futures added 1.09 cents to $2.7391 per gallon. Natural gas slid 1.6 cents to $3.68 per 1,000 cubic feet.
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Alex Kennedy in Singapore contributed to this report.
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