Brent crude rose above $108 on Monday, as hopes brightened for a revival in demand after euro zone ministers approved an EU-IMF plan for restructuring Cyprus's banking sector, averting a worsening crisis for the region.
Cyprus clinched a last-ditch deal with international lenders for a $13-billion bailout that will shut down the Mediterranean island's second-largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians. Asian shares, base metals and most risk assets rose as a result.
"This is certainly very good for risk appetite overall and that's going to have a positive impact across oil markets, so we should see some positive sentiment reverberate through energy markets overall for at least the next 24 to 48 hours," said Ben le Brun, an analyst at OptionsXpress in Sydney.
Brent crude had gained 52 cents to $108.18 a barrel by 0520 GMT, after ending last week down 2.2 percent in its second straight week of losses. U.S. oil increased 48 cents to $94.19, after rising for the third straight week.
The plan, swiftly endorsed by euro zone finance ministers, will spare Cyprus a financial meltdown by winding down Popular Bank of Cyprus and shifting deposits below 100,000 euros to the Bank of Cyprus to create a "good bank".
The euro gained against the dollar on the news in early Asian trading. The weaker dollar made commodities denominated in the U.S. currency more attractive.