Oil jumped more than $3 to over $119 a barrel on Monday on supply concerns from Opec members Nigeria and Iran and as US data eased worries about the health of the world's biggest economy.
US crude gained $3.13 to trade at $119.45 at 10.34 am EDT (1433 GMT), near the record $119.93 hit in April. London Brent crude rose $3.24 to $117.80 in light trade due to a bank holiday in Britain.
The US service sector grew unexpectedly in April, snapping a three-month period of contraction, according to the Institute for Supply Management.
The report followed data released Friday that showed US payrolls fell by 20,000 jobs in March, a quarter of the losses expected, helping to counter concerns that the weaker US economy could drag down oil demand.
"Friday's unemployment data reinforces the point that we may not see too much demand deterioration. That's got people putting money back in this market," said Jim Ritterbusch of Ritterbusch and Associates in Galena, Illinois.
Further support came from Iran's announcement on Monday it would not consider any incentives offered by world powers that would constrain its right to nuclear technology.
The comments come just three days after major powers said they would make a new offer to convince the Islamic republic to halt its nuclear plans, a process which the West believes Tehran wants to master so that it can build nuclear weapons.
Iran's standoff with the West over its nuclear program added geopolitical concerns and fundamental tightness last year that sent crude to new highs.
Crude has continued to surge since then, extending a six-year rally that has sent prices up five-fold to near $120 a barrel last month on a wave of investment by speculators seeking to hedge against inflation and the weak dollar.
Additional supply worries came from Nigeria, where Royal Dutch Shell was forced to shut more of its production after militants on Saturday attacked a flowstation in the oil-rich Niger Delta.
Renewed clashes between Turkey and Kurdish rebels in northern Iraq also lent support to oil prices. The Turkish army said on Saturday it killed more than 150 Kurdish PKK fighters in air strikes in northern Iraq last week, but the rebel group denied this and security forces in the region also expressed scepticism. - Reuters