Brent North Sea crude for delivery in April rocketed as high as $104.07 in afternoon London deals. It later stood at $103.76, up $2.12 from Tuesday's closing level.

New York's main contract, light sweet crude for March, more commonly known as West Texas Intermediate (WTI), jumped $1.18 to $85.50 a barrel.

Israel's foreign minister said Wednesday that Iran is sending two warships into the Mediterranean Sea, and called the act a "provocation" the Jewish state could not ignore for long.

"Tonight two Iranian warships are supposed to cross the Suez Canal into the Mediterranean Sea on their way to Syria," Foreign Minister Avigdor Lieberman said.

"The international community has to understand that Israel cannot ignore these provocations for eternity," he said.

Sucden analyst Myrto Sokou said the news prompted an immediate rally on international oil markets.

"Crude oil prices rallied in the afternoon session, as WTI crude oil prices climbed toward $86 and Brent oil surged above $104, following news that two Iranian warships have planned to transit through Suez Canal to the Mediterranean Sea and reach Syria today, according to the Israel's foreign minister," Sokou told AFP.

"The news spread renewed worries across the Middle East area, with potential serious disruption at the Suez Canal drove oil prices higher."

Oil prices have risen over the past few weeks amid supply concerns in the volatile region as demonstrators have taken to the streets seeking the ousting of their leaders, with the presidents of Egypt and Tunisia forced out.

The demonstrations have led to similar movements in other Arab states, including Iran, Yemen and Bahrain, drawing inspiration from these successes.

The price rise is "still related to the low level, for now, of spreading unrest in the Middle East and North Africa," said Westhouse Securities analyst David Hart.

"As long as protests continue in Iran, Libya, Bahrain, etc, then the associated risk premium will support higher oil prices."

A record price gap exists between New York's WTI crude and Brent due to abundant crude supplies in the United States, where the Cushing depot in Oklahoma is nearly full.

Tthe US government's Department of Energy announced Wednesday that American crude inventories rose by 860,000 barrels in the week ending February 11.

Expectations had been for a larger gain of 1.7 million barrels, according to analysts polled by Dow Jones Newswires.

"Brent crude continues to remain fairly well supported over spreading unrest throughout the Middle East with Libya and Iran starting to experience problems of their own," added CMC Markets analyst Michael Hewson.

"US crude (prices) ... have rebounded from the lows on a slightly lower-than-expected increase to inventories."

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