Oil gains on Greece deal relief

Crude oil prices rose back towards six-month highs on Monday, as demand sensitive assets were boosted after Greece approved an austerity bill to secure a second bailout.

Equities, commodities and the euro all rose as the Greek parliament approved the bill, lifting the threat of a default that would have jolted markets.

Front-month Brent crude was up 93 cents to $118.24 at 1230 GMT. The benchmark gained 2.6 percent last week, posting its third straight weekly rise. US crude was up 92 cents at $99.59 a barrel.

The dollar index fell 0.5 percent. A weaker US currency supports dollar-denominated oil by making the commodity cheaper for consumers using other currencies.

Oil was near highs not seen since the start of August, as more encouraging data from the United States and China improved the demand outlook.

Tension between Iran and the West, which has triggered a forthcoming European Union oil embargo, and violence in Syria have spurred a risk premium and worries about supply.

“I think it is a given that Europe will have virtually zero growth this year, but that the recovery in the US and demand from China, India, etc will keep oil prices high,» said Christopher Bellew at Jefferies Bache.

The European debt situation still has potential to worry investors and pressure assets like oil this week.

Greece must still detail how a further 325 million euros of spending cuts will be reached, and give binding assurances the full plan will be implemented before euro zone finance ministers meet on Wednesday.

Bellew said further scares in Europe could see the price move back to around $112 per barrel. «But really there is more risk to the upside with chaos in Syria and much less oil coming out of Iran.”

Investors are also worried that tension in the Middle East will worsen after Iranian President Mahmoud Ahmadinejad said on Saturday the Islamic Republic would soon announce advances in its nuclear program.

“The nation is looking to showcase its nuclear capabilities to the rest of the world in the coming days, which we think could provide additional support to oil prices in the region as tensions flare,» analysts at ANZ said in a report. [Reuters]