By Stephanie Kelly
Brent crude futures for December delivery rose 35 cents to settle at $80.78 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 44 cents to settle at $71.78 a barrel.
Last week, both contracts fell by more than 4 percent as U.S. stock markets tumbled.
However, rising geopolitical tension between the United States, the world's top oil consumer, and Saudi Arabia, one of the biggest crude producers, supported prices on Monday.
Riyadh has been under pressure since journalist Jamal Khashoggi, a critic of the kingdom and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul.
U.S. President Donald Trump has threatened "severe punishment" if it is found that Khashoggi was killed in the consulate.
Saudi Arabia said it would retaliate for any action against it over the Khashoggi case, state news agency SPA reported on Sunday, quoting an official source. This comes at a critical time for global oil markets, which are bracing for U.S. sanctions against Iran due to come into force on Nov. 4.
The United States is still aiming to cut Iran's oil sales to zero, Washington's special envoy for Iran said on Monday.
Turkey and Italy are the last buyers of Iranian crude outside China, India and the Middle East, according to tanker data and an industry source, the latest sign that shipments are taking a major hit from the looming sanctions.
Some producers are aiming to boost production amid the falling Iranian exports, with Iraq planning to increase oil exports from its southern ports to 4 millions barrels per day (bpd) in the first quarter of 2019.
"If the Saudis don't come to the rescue when the Iranian sanctions kick in ... it's going to be a very undersupplied market. That was the fear that was initially driving prices higher," said Phil Flynn, an analyst at Price Futures Group in Chicago.
However, some risk premium was taken out of the market when Trump on Monday raised the possibility that "rogue killers" could have been responsible for Khashoggi's disappearance.
Exerting downward pressure on prices, Friday's monthly report from the International Energy Agency said the market looked "adequately supplied for now" and cut its forecasts for world oil demand growth this year and next.
The secretary general of the Organization of the Petroleum Exporting Countries last week said that the group saw the oil market as well supplied and that it was wary of creating a glut next year.
Market participants also focused on a weakening gasoline crack spread. Gasoline's premium to WTI sank to $9.49, the weakest since February 2017.
"We are continuing to emphasize a virtual collapse in the NYMEX gasoline crack spreads as a bearish consideration to the crude markets that provided a significant offset to the weekend Saudi headlines in today's trade," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
(Reporting by Stephanie Kelly in New York, Christopher Johnson in London and Meng Meng and Aizhu Chen in Beijing; Editing by Bill Berkrot and Sandra Maler)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)