A falling dollar on Tuesday also gave traders reason to buy. Investors often buy commodities such as oil as a hedge against inflation when the dollar falls, and a weaker greenback makes oil cheaper to investors overseas. Many analysts feel the dollar's protracted decline is the real reason oil prices have nearly doubled since last year.
Cordier said investors are also increasingly concerned about falling oil production in Russia and Mexico, which are major oil producers. And prices are still supported by concerns about supply disruptions in Nigeria, where production at a Royal Dutch Shell PLC facility was cut after a weekend attack, and in Iraq, where Kurdish rebels warned they could launch suicide attacks against American interests to punish the US for sharing intelligence with Turkey after Turkey bombed rebel bases in Iraq on Friday.
In other Nymex trading Tuesday, June gasoline futures rose 5.26 cents to settle at $3.1055 a gallon after earlier setting a new trading record of $3.126. June heating oil futures rose 4.7 cents to settle at $3.3535 a gallon after rising to their own trading record of $3.3712, and June natural gas futures fell 2.8 cents to settle at $11.15 per 1,000 cubic feet.
In London, June Brent crude futures rose $2.18 to settle at $120.31 a barrel on the ICE Futures exchange.
