New York's main contract, West Texas Intermediate for January delivery, was up $1.18 at $97.22 a barrel in afternoon trade, while Brent North Sea crude for January gained 26 cents to $112.88.

WTI surged $2.22 in New York after TransCanada, the Canadian firm building the Keystone Pipeline, said in a filing with the Federal Energy Regulatory Commission that the southern portion of the pipeline would begin carrying crude from backed-up inland depots to Texas coast refineries on January 3.

Brent gained $1.17 in London trade.

"WTI has surged because of the news of the opening of a section of the Keystone pipeline, which will be a vital new transportation link to ease the build-up of stockpiles in the US," Desmond Chua, market analyst at CMC Markets in Singapore, told AFP.

He said US oil prices also gained support from expectations that the Department of Energy will report on Wednesday that commercial crude inventories fell last week, ending 10 consecutive weeks of gains.

WTI traded above $100 a barrel for much of the summer, but oversupply concerns and easing geopolitical concerns in the Middle East have dampened prices.

Investors are also looking ahead to Wednesday's meeting of the 12-nation Organization of Petroleum Exporting Countries.

The cartel's kingpin Saudi Arabia says current prices averaging $100 per barrel provide acceptable income for producers without weighing too heavily on consumers.

"Brent prices are likely to gain support after the meeting as OPEC is likely to hold its production level steady at current levels," Chua said.