Investing.com - Oil prices added to sharp gains on Monday, after a report from industry research group Genscape showed that supplies at the Cushing, Oklahoma delivery point for U.S. crude fell last week.
Futures were already well bid ahead of the Genscape report amid mounting geopolitical tensions in the Middle East after Saudi Arabia cut diplomatic ties with Iran over the weekend.
The move followed a weekend storming of the Saudi embassy in Tehran in response to the kingdom's execution of a prominent Shiite cleric.
Crude oil for delivery in February on the New York Mercantile Exchange jumped 85 cents, or 2.29%, to trade at $37.89 a barrel during U.S. morning hours. It earlier rose by as much as 3.5% to a session peak of $38.39, the most since December 9.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for February delivery rallied $1.27, or 3.39%, to trade at $38.55 a barrel. London-traded Brent futures were up 4.4% earlier in the day to touch $38.98, a level not seen since December 15.
Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at 66 cents, compared to a gap of 24 cents by close of trade on Thursday.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by the Organization of the Petroleum Exporting Countries last year not to cut production in order to defend market share.
Oversupply issue will be exacerbated further once Iran returns to the global oil market early next year after western-imposed sanctions are lifted. Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the glut of oil that has sent prices tumbling.