Crude futures rose Monday as Congress reached a tentative agreement to raise the U.S. debt ceiling and cut spending, potentially averting a credit default by the world's largest oil consumer.

Light, sweet crude for September delivery recently traded $2.45, or 2.6%, higher at $98.15 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $2.66 cents higher at $119.40 a barrel.

Oil prices surged amid a global rally in equities markets after U.S. President Barack Obama and Congressional leaders on Sunday reached a deal to raise the government's debt ceiling while cutting spending by about $2.4 trillion.

Both the U.S. House and Senate are expected to meet Monday to discuss the details of the plan, which calls for increasing the debt ceiling by at least $2.1 trillion through the end of 2012.

"The agreement appears to have lifted sentiment all over the globe," said analysts from JBC Energy in a research report.

The Dow Jones Industrial Average rose by triple digits at the opening of trading Monday, following gains in Asian and European markets overnight. The Standard & Poor's 500 was recently trading up 1% to 1,304.

The debt debate roiled markets over the past week as a political stalemate in Washington forced traders to contemplate an unprecedented default on U.S. debt. Oil and other commodities slumped heading into the weekend on fears that a failure to reach agreement could send the economy back into recession and reduce demand for raw materials.

"You had a market that was oversold ahead of this news," said Ray Carbone, president of Paramount Options. He added, however, that the knee-jerk reaction higher is unlikely to break through oil's price range. Crude futures have traded in the mid-$90 range for over a month.

Worries over the health of the U.S. economy, and consequently its oil demand, also served to cap prices. U.S. gross domestic product grew at a weaker-than-expected rate of 1.3% in the second quarter, the Commerce Department said Friday, while first-quarter growth was revised down to 0.4% from the earlier estimate of 1.9%.

"As initial optimism fades away the focus will soon be shifted back to the weak U.S. economic fundamentals, which are not going to materially change anytime soon," said Mike Fitzpatrick, an analyst with Kilduff Group.

Europe's Brent crude increased its premium over Nymex-traded WTI, with the spread widening to more than $22 earlier in the session.

Delays to seven August-loading cargoes of North Sea Forties crude--the main component of the benchmark for over half the world's oil--were supporting Brent. Earlier, the European benchmark rose 3.1% to hit a six-and-a-half week high of $120.40 a barrel, but quickly slumped as market participants took profits.

Front-month September reformulated gasoline blendstock, or RBOB, recently traded 6.86 cents, or 2.2%, higher at $3.1265 a gallon. September heating oil recently traded 8.59, or 2.8%, higher at $3.1853 a gallon.