Oil prices climbed to the highest point since late July on Monday as traders focused on declining U.S. petroleum supplies and also bet that Europe would solve its debt crisis.
Benchmark crude rose $1.26 cents to end the day at $95.52 per barrel in New York. The benchmark price hasn't finished that high since July 29. Brent crude, which is used to price many foreign oil varieties, increased $2.59 to finish at $114.56 in London.
Prices rose early in the day as political rivals in Greece worked out a power-sharing plan that will be crucial for securing a $179 billion bailout. The partnership between Socialist Prime Minister George Papandreou and conservative leader Antonis Samaras raised hopes that Greece will follow through with spending cuts and other unpopular austerity measures that are needed as part of the international aid package.
A default in Greece could lead to bank failures across the eurozone, further slowing its economy and cutting oil demand.
Still, economists remain wary. Their attention is now focused on the wobbly economy of Italy, which also faces huge debts and slow growth. On Monday, borrowing rates soared in Italy, intensifying pressure on Premier Silvio Berlusconi to resign. Unlike Greece, Italy is considered too large to rescue.
"This whole eurozone thing is far from resolved," independent analyst Jim Ritterbusch said.
Besides the political developments in Europe, analysts said investors are also paying closer attention to shrinking oil, gasoline and diesel supplies in parts of the U.S.
The government reported last week that total petroleum stocks are down 62.6 percent from a year ago and they're 5.6 percent lower than the five-year average. Supplies are falling as refineries import less oil while shipping more diesel and gasoline overseas. Airlines and shipping companies also are using more fuel than they did last year, and that's pushing prices even higher.
"Oil demand is at a high point this time of year," independent analyst Andrew Lipow said. "China is importing more diesel, and we're hauling around more stuff."
At the pump, retail gasoline prices fell less than a penny Monday to a national average of $3.407 per gallon, according to AAA, Wright Express and Oil Price Information Service. Gasoline has been essentially flat during the last month, rising by a little more than a penny. But it's 55.9 cents higher than it was a year ago.
In other energy trading, heating oil rose 4.91 cents to end at $3.1198 per gallon and gasoline futures added 6.48 cents to finish at $2.7282 per gallon. Natural gas lost 8.7 cents to end at $3.696 per 1,000 cubic feet.