Oil prices rose on Tuesday, supported by Bank of Japan plans for asset buying and strong investor confidence data from Germany that boosted the outlook for fuel demand.
News that the Bank of Japan would switch to an open-ended commitment to buying assets next year and double its inflation target to help end years of economic stagnation gave crude an early lift.
Optimism increased following a surprisingly strong German ZEW reading on investor sentiment, a sign the euro zone crisis was no longer hitting Europe's largest economy as hard as it did last year.
Further support came from gains in the U.S. stock market after the Dow and the Standard & Poor's 500 indexes closed at five-year highs on Friday.
"I think there is a wider risk on trade flow, with stock markets positive, Bank of Japan policy shift, and the German investor confidence," said Tim Evans, energy analyst for Citi Futures Perspective.
"Those got us started higher earlier in the day and we've kind of built on those gains as the session's gone on."
RBOB gasoline futures led the oil complex higher, gaining more than 1 percent, on expectations a heavy Spring maintenance season would tighten supplies.
Brent March crude rose 71 cents to settle at $112.42 a barrel. The U.S. February crude contract, which expired at the settlement, gained 68 cents to settle at $96.24 a barrel. The more heavily traded March crude rose 64 cents to settle at $96.68 a barrel.
Brent trading volumes were heavy, up 17 percent over the 30-day moving average at the close, while U.S. volumes were closer to normal levels.
Brent's premium to U.S. crude narrowed slightly to $15.77 a barrel, following news the governor of Nebraska had approved a revised route for the Keystone XL pipeline that would send Canadian crude to refineries in Texas and help clear growing inventories of crude in the Midwest that has depressed U.S. oil futures.
The U.S. State Department is expected release its own environmental assessment of the $5.3 billion project soon, a step it must take before deciding the fate of the pipeline in the months ahead.
Goldman Sachs said in a research not that the expanded pipeline flows aimed at easing the bottleneck of crude in the Midwest by shipping it to the Gulf Coast refining hub cause another glut of crude to emerge in that region.
U.S. financial markets were closed on Monday for a holiday, with trading on electronic platforms being done for a Tuesday trade date. Weekly U.S. inventory data from the American Petroleum Institute was delayed by one day to Wednesday by the holiday, while the U.S. Energy Information Administration's report will be released on Thursday.
The data is expected to show builds in U.S. crude, gasoline and distillate inventories, according to a Reuters poll of analysts.
(Reporting by Robert Gibbons in New York, Peg Mackey in London and Florence Tan in Singapore; Editing by Bob Burgdorfer and David Gregorio)