(Reuters) - Crude oil futures rose on Monday, with Brent nearing $114 a barrel, on optimism European policymakers would reach an agreement to tackle the euro zone's debt crisis and help stem a slowdown in oil demand growth.
Brent crude rose 77 cents to $113.00 a barrel by 0850 GMT, having hit as high as $113.86. U.S. crude was up $1.26 to $88.06.
In unusually direct language, finance ministers and central bankers of the Group of 20 major economies meeting in Paris said they expected an October 23 European Union summit to "decisively address the current challenges through a comprehensive plan."
France's Finance Minister Francois Baroin told the meeting over the weekend France and Germany, the leading euro zone powers, were making good progress on a plan to resolve the euro zone's debt crisis and recapitalize its banks.
Asian and European shares also rose. The FTSEurofirst 300 .FTEU3 index of top European shares was up 0.7 percent at 982.15 points, hitting a 10-week high. .EU
Analysts said optimism about the euro zone crisis and recent supply problems in some oil producers including Libya had been supporting prices but the market was prone to the downside.
"Despite an improved macro outlook, a complete resolution to Europe's sovereign debt issue is still far away," Morgan Stanley said in its research note.
"Although the recent rally and ongoing supply issues suggest crude fundamentals are strong, we believe that risks remain skewed to the downside."
TIGHT MARKET
Supply of light crude has remained tight due to underproduction in the North Sea, Nigeria and Libya, which has just resumed oil exports after a halt due to the civil war.
Oil inventories remain low in Europe and the United States ahead of the winter heating season.
Brent's November contract, which expired on Friday, posted a weekly gain of 8.3 percent, the largest since the week to February 25. U.S. crude rose $2.57 to settle at $86.80 a barrel, the highest since September 20. It posted a weekly gain of 4.6 percent, the biggest since the week to October 7.
"While a rapid resumption of Libyan production remains a wild card, until sustained exports are seen, the Brent and light sweet crude market will remain sensitive to minor disruptions," analysts at JPMorgan said in a report.
Libyan government fighters battled on Sunday to subdue pockets of resistance by pro-Muammar Gaddafi fighters, whose refusal to abandon the ousted leader's hometown of Sirte is delaying the country's move to democracy.
U.S. regulators this week will finalize their toughest crackdown yet on volatile oil and metal markets, concluding nearly four years of fierce debate over whether limits on speculative trade can tame prices.
