Brent crude oil rose towards $110 per barrel on Tuesday, reaching a three-month high, due to lower U.S. inventories, firm demand and concern that turmoil in Egypt could disrupt supply.
Brent crude gained 21 cents to $109.30 a barrel by 1400 GMT. U.S. oil added 33 cents to $106.65. It touched its highest since March last year of $107.45 on July 11.
Brent oil, the European benchmark, has risen 7.2 percent so far this month and is on track for its biggest monthly gain since August, lifted by sharply falling U.S. crude oil stocks, an improving economic outlook and supply disruption. U.S. crude is up 10.8 percent, its biggest rise since October 2011.
"Global demand has picked up strongly. There are huge supply problems at a time when refineries are increasing output," Amrita Sen, an analyst at Energy Aspects, said.
Investors are also watching developments in Egypt, where seven people were killed and more than 260 wounded when supporters of Mohamed Mursi clashed with the deposed president's opponents and security forces through the night.
Reinforcing a perception that there will be no quick solution to the problems afflicting the country, a senior figure in Egypt's Muslim Brotherhood said on Tuesday talk of national reconciliation among rival parties and groups was lies.
Testimony on Wednesday from Federal Reserve Chairman Ben Bernanke will also be in focus. There is a view that the U.S. central bank will reduce its bond buying this year and scrap it by mid-2014.
The strength in oil prices, partly caused by speculative investors, could start to dampen demand, analysts said.
German analyst and investor sentiment unexpectedly fell in July after negative data for Europe's largest economy, a survey showed on Tuesday.
U.S. commercial crude stocks probably fell 2 million barrels on average for the week ended July 12, a Reuters poll of eight analysts showed.
U.S. crude inventories plunged 20 million barrels over the previous two weeks, the deepest two-week draw on record, Energy Information Administration data showed on July 10.