US crude has surged to a 28-month high of $100 (£61.85) a barrel as escalating violence in Libya slashed output there and investors bet the unrest could spread to other oil exporters.
Brent has posted the biggest three-day gain since October 2009, rising to as much as $111.85 a barrel. That marked its highest since October 2008, shortly after the collapse of investment bank Lehman Brothers.
US crude has shot up more than 15 per cent since Friday.
“It’s been a trying few days for world markets, and if the situation in Libya continues to show no tangible sign of a peaceful resolution, the week could plumb greater depths yet,” said Yusuf Heusen, senior sales trader at IG Index.
“There is real concern that if the unrest were to worsen, the effect on oil supplies could start to have an impact on global economic growth.”
West Texas Intermediate futures rose 3.7 per cent to $99 a barrel in morning trading in New York, paring some earlier gains. Brent gave up some of its earlier advance to trade up 5.1 per cent at $111.18.
A lethal political standoff between Libya's Muammar Gaddafi and rebel factions now in control of the country's oil-rich eastern region has cut output in the world's No. 12 crude exporter by more than 25 per cent, or 400,000 barrels a day.
The price surge raised concern about the impact of costly fuel on a fragile US economic recovery and dragged US equities lower.
A jump in oil to a record $147 a barrel during 2008 led to demand destruction and contributed to the deepest global economic downturn since World War Two.
Ian Harwood, chief economist at Evolution Securities, said the worries were justified in principle but it was too early to begin cutting GDP forecasts on the expectation oil prices would hold back the global recovery.
“The higher level of oil prices has to be sustained and frankly it’s not yet clear that this will be the case, given the geo-political nature of the forces which have recently pushed the oil price up,” he said.