Crude oil topped $US83 dollars a barrel in New York for the first time in 14 months, getting a boost from a weakening dollar late in the day.
New York's main futures contract, light sweet crude for delivery in February, jumped 1.41 dollars to settle at 83.18 dollars.
The US benchmark oil rose to an intraday peak of 83.52 dollars, its highest price since October 9, 2008.
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London's Brent North Sea crude for February advanced 1.30 dollars to close at 81.89 dollars.
"I think it's a liquidity-related phenomenon," said Ellis Eckland, an independent analyst.
After trading lower for part of the session, the New York contract broke through the 82-dollar level that it had flirted with since Monday as the dollar lost ground against the euro.
A weaker dollar makes dollar-priced oil and other commodities more attractive to buyers using stronger currencies.
The market also digested a bearish report on US energy stockpiles.
The US Department of Energy (DoE) reported that crude oil reserves rose by 1.3 million barrels in the week ending January 1, instead of the expected drop of some 300,000 barrels.
Stockpiles of distillates -- including heating fuel and diesel -- fell by 300,000 barrels in the week, sharply below the average analyst forecast of a drop of 1.8 million barrels amid cold weather across sections of the US.
Cold-snap thought to have impacted consumption
The market had keenly awaited the heating fuel numbers as cold weather tightened its grip in the northern regions of the world's largest energy-consuming nation.
Eckland said that oil prices fell after the release of the inventories report.
"The market thought it was disappointing," he added.
However, analysts forecast that heating fuel demand will soar in the coming days and weeks as cold winter weather sweeps the northern hemisphere.
"The recent cold snap will have an impact on heating oil demand," said Calyon analyst Christophe Barret.
"The US National Weather Service estimates that this week heating oil demand will be 11 per cent above normal," he said.
"Cold temperatures have already added almost 20 per cent... to heating oil demand in December."
"A weather event is dominating the oil headlines," said PVM oil analyst David Hufton.
"The northern hemisphere is in a deep freeze, from Beijing, through India to Poland onto London and New York and down to Florida," he said.
Adam Sieminski of Deutsche Bank said that "increasing reports of cold weather in China, United States, the UK and France are all leading to price increases. It increases demand and should show up in lower inventories".
Given the fundamentals of supply and demand, he said, "at some point we should see a downward correction."
