Crude prices surged on Monday as tension between Israel and Hamas escalated and hopes rose that U.S. fiscal cliff can be avoided.
Traders were concerned about the intensified tension in the Middle East. Israel bombed dozens of targets in the Gaza Strip on Monday, while Palestinian rocket fire continued to hit Israeli cities. An Israeli official said the country got prepared for a ground invasion in Gaza but preferred a diplomatic solution.
United Nations Secretary General Ban Ki-moon was due to arrive in Cairo on Monday to support ceasefire efforts led by Egypt. According to reports, a delegation from Israel had also been to Cairo for truce talks.
Optimism for a debt deal in Washington also boosted risk appetite.
U.S. President Barack Obama and congressional leaders met for the first time last Friday after the U.S. presidential election. After the meeting, congressional leaders expressed their confidence in reaching a debt deal to avert the so-called "fiscal cliff", a combination of automatic spending cuts and spikes in tax rates that could dragged the U.S. economy into a severe recession. Also adding on the gains, existing home sales unexpectedly rose 2.1 percent in October to a seasonally adjusted annual rate of 4. 79 million units, according to the National Association of Realtors.
But trading volumes were light, with U.S. crude volumes about 30 percent below the 30-day average, and Brent volumes about 15 percent below 30-day average.
Light, sweet crude for January delivery gained 2.36 dollars, or 2.72 percent to settle at 89.28 dollars a barrel on the New York Mercantile Exchange.
Brent crude for January delivery also jumped 2.75 dollars, or 2. 52 percent to settle at 111.70 dollars a barrel.