Oil gains on Greece deal relief, doubts linger

By Simon Falush

LONDON (Reuters) - Crude oil prices rose on Monday, back towards six-month highs touched last week, as assets that are sensitive to risk climbed after Greece approved an austerity bill to secure a second bailout.

However Brent came off highs seen earlier in the session as gasoil prices weakened due to rising temperatures in Europe after a cold spell, and because of lingering uncertainty about economic prospects for the euro zone.

Equities, commodities and the euro all rose as the Greek parliament approved the bill, lifting the threat of a default that would have jolted markets.

Front-month Brent crude was up 43 cents to $117.74 at 1538 GMT. The benchmark gained 2.6 percent last week, posting its third straight weekly rise. U.S. crude was up 87 cents at $99.54 a barrel.

The dollar index fell 0.3 percent. A weaker U.S. currency supports dollar-denominated oil by making the commodity cheaper for consumers using other currencies.

Brent crude was close to highs not seen since the start of August, as more encouraging data from the United States and China improved the demand outlook.

Tension between Iran and the West, which has triggered a forthcoming European Union oil embargo, and violence in Syria have spurred a risk premium and worries about supply.

"I think it is a given that Europe will have virtually zero growth this year, but that the recovery in the U.S. and demand from China, India, etc will keep oil prices high," said Christopher Bellew at Jefferies Bache.

The European debt situation still has potential to worry investors and pressure assets like oil this week.

Greece must still detail how a further 325 million euros of spending cuts will be reached, and give binding assurances the full plan will be implemented before euro zone finance ministers meet on Wednesday.

Bellew said further scares in Europe could see the price move back to around $112 per barrel. "But really there is more risk to the upside with chaos in Syria and much less oil coming out of Iran."

TENSION MOUNTS

Highlighting the tension in the Middle East, Israeli Prime Minister Benjamin Netanyahu accused Iran and its Lebanese ally Hezbollah of involvement in bomb attacks on Israel's embassies in India and Georgia.

Iran rejected as "sheer lies" accusations that it was involved in a bomb attack on the Israeli embassy in India.

This followed Iranian President Mahmoud Ahmadinejad saying on Saturday the Islamic Republic would soon announce advances in its nuclear programme.

Brent is now in a bullish trend for Brent crude, according to Phil Roberts, analyst at Barclays Capital.

"There's further upside potential as long as it stays above $114 per barrel. We see the next significant resistance at $120-$121 a barrel and after that, last year's high at $127."

Later on Monday President Barack Obama is scheduled to submit to the U.S. Congress his fiscal 2013 budget proposal to chart a fiscal path for the next 10 years.

(Additional reporting by Jessica Jaganathan in Singapore; Editing by Anthony Barker)