Brent crude was up 77 cents to $97.32 a barrel, with analysts speculating it will head over $100 before long.
US oil jumped $1 a barrel, above $95 for the first time since August last year.
Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, said: "The oil market is quickly coming to terms with the fact that the OPEC+ cuts announced in the summer are having a deep effect on crude availability.”
He added: "Stocks are drawing while demand keeps growing. We are still far away from a price level causing demand destruction."
In general, markets are cautious. Susannah Streeter, head of money and markets, Hargreaves Lansdown, said:
‘’Cautious sentiment is dominating as oil prices ramp up while investors digest yet more unappetising news about China’s fragile property sector, fuelling worries about contagion in the economy. The FTSE 100 has opened flat, with betting firms on the backfoot as costs of new gambling safety rules mount up, but energy firms have gained ground as the benchmark Brent Crude has surged in price.”
Shares in Shell rose 9p to 2638p. BP was up 3p to 541p.
While oil passing $100 a barrel may only be psychologically important, it is increasing concern that energy costs will be passed on from big companies to consumers.
Streeter added: “This might cause another temporary headache for central bank policymakers, but industry analysis forecasts that oil demand is expected to start slowing next year as weakening economic conditions take hold and more electric vehicles roll out onto the roads. Still, oil prices are unlikely to retreat markedly given it’s in the interest of big producers like Saudi Arabia to keep prices in an elevated, but stable, range.”
The pound has also been under pressure. Is was at around $1.22 against the dollar, leaving it on track for its worst month since Liz Truss’s disastrous mini-budget a year ago.