Disruptions in Nigerian oil supplies amid rising civil unrest also fueled gains. Light, sweet crude on the New York Mercantile Exchange for February delivery rose as much as 60 cents to US$66.91 a barrel before receding to US$66.78 a barrel, up 47 cents.

The Nymex contract on Tuesday leaped US$2.39 to settle at US$66.31 a barrel, a three-and-a-half month high.

Analysts say oil prices could rise above US$70 a barrel if the nuclear dispute between the West and Iran does not reach a quick resolution.

Pressure on Iran intensified Tuesday with key European countries and the United States moving ahead with plans to refer the dispute over Tehran's nuclear enrichment to the UN Security Council, according to a draft text by Britain proposing referral when the International Atomic Energy Agency's holds a Feb. 2 board meeting.

Although the draft text stopped short of calling for punitive measures such as sanctions, some analysts said they were concerned Iran would be defiant if referred to the council, leading to heightened tensions.