Oil rose over $1, back above $141 a barrel, bolstered by a weak US dollar and continuing tensions between Israel and Iran over Tehran's nuclear program.US light crude for August delivery was up $1.30 at $141.51 a barrel in Globex electronic trading, trading within range of the record of $142.99 struck on Friday.
London Brent crude rose 98 cents to $141.29.
“The U.S. dollar is down and there are many high-level geopolitical news items, particularly in the Middle East, that are pushing prices up,” said Mark Pervan, a senior commodities analyst at the Australian & New Zealand (ANZ) Bank in Melbourne.
“Oil is now a very jittery and news-sensitive market that is running on rumors and concerns of future supply disruptions.”
Iran's foreign minister said on Sunday he did not believe Israel was in a position to attack his country over its nuclear program, while an Iranian general announced plans to prepare 320,000 graves for enemy soldiers.
The comments were the latest in an escalating war of words between the arch-foes that has helped fuel speculation of a possible Israeli attack on Iran, the world's fourth-largest oil exporter. The speculation has helped push oil prices to record highs.
Comments from Iran that it would impose controls on shipping in the vital Gulf oil route if the country was attacked also added to supply jitters.
The Straits of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula, accounts for roughly 40% of the world's traded oil flows.
A senior Iranian oil official said he expected crude prices to rise to $150 a barrel in the near future with the onset of higher demand in summer, the semi-official Mehr news agency reported on Saturday.
Oil prices have jumped more than 45% this year, extending a six-year rally, as supply struggles to keep pace with rising demand from emerging economies, such as China and India.
Additional support has come from a flood of cash from new investors buying up commodities to hedge against inflation and the weak US dollar.
Analysts said dealers would be eyeing US economic indicators due later on Monday as well as the European Central Bank's interest rates decision on Thursday for further guidance on the US dollar.
Oil markets are over-supplied but it would not be wise for any OPEC exporter to tighten the taps given the risk of exacerbating prices, Qatari Oil Minister Abdullah al-Attiyah said on Sunday.
Attiyah's comments came after Libya's most senior oil official said last week he was studying the possibility of cutting output in response to a US threats to sue OPEC members, although he said the North African country had no concrete plans to do so for now. (Reuters)