London - Brent crude surged on Monday, pushing its premium over US crude to a record high, due partly to a lack of cohesion in Opec on increasing output and to continuing unrest in the oil-rich Middle East.
Brent crude futures bounced from earlier losses and surged by 66 cents to $119.44 a barrel by 1438 GMT, having briefly topped $120 earlier.
But US crude futures slipped by 69 cents to $98.60 a barrel.
The discount of US crude to ICE Brent crude widened to a record $21.60 a barrel and was at $20.84.
"While in the short term, markets appear well supplied, the current very high Brent prices reflect rising geopolitical risk and possible tensions on world supply-demand balances in the future," said Christophe Barret, global oil analyst with Credit Agricole.
Most of Liby's oil output, which had previously been around 1.6 million barrels per day, has remained shut since February due to civil unrest.
In Syria President Bashar al-Assad continued a crackdown against dissidents challenging his 11-year rule. Syria is a small oil producer but it neighbours oil-rich Gulf countries including Saudi Arabia.
Brent was also responding to OPEC's official output, which was left unchanged due to a lack of agreement at its meeting last week.
Forties underproduction
Underproduction of the key North Sea Forties crude exacerbated the premium on ICE Brent futures.
Oliver Jakob with Petromatrix said the spread was driven by financial investors.
"We fear that Brent futures are now falling into investment overdrive. Because we are unable to fundamentally or economically explain the difference between Brent at a $15 per barrel or a $20 barrel premium to US crude, we will not put a lot of risk units on trying to trade that spread," he said in a research note.
US crude has been trading at a steep discount this year partly because of rising flows of Canadian crude via pipeline into the Cushing, Oklahoma, delivery point of the US West Texas Intermediate crude contract.
"Brent prices appear to reflect geopolitical risk and world market conditions, while WTI is likely to remain isolated from world market events as a result of high stocks in the US mid-continent," Barret said.
There has been a lack of infrastructure to move US crude to the refineries concentrated along the US Gulf Coast, keeping the discount steep.
"Until there are pipelines to take crude away from the Midwest down into the US Gulf, this will continue," said Christopher Bellew at Bache Commodities.
Top oil exporter Saudi Arabia will raise output to 10 million barrels per day in July, Saudi newspaper al-Hayat reported on Friday, as Riyadh goes it alone, outside official Opec policy, to place additional supplies into Asia.