Oil rises on Middle East tension, weaker dollar (2)

Meanwhile, the dollar weakened against the euro on Wednesday, helping boost oil prices.

Also supportive to oil prices, TransCanada said the loss of power on its Keystone pipeline that carries Canadian crude into the U.S. midwest, had affected the company's oil shipments and would cause supplies delays.

But worries about oil demand outlook weighed and limited gains, as U.S. "fiscal cliff" loomed and international lenders held back from offering further bailout fund to the debt-burdened Greece.

Brent's December contract expires on Thursday, and the U.S. December contract expires on Friday.

Light, sweet crude for December delivery added 94 cents, or 1. 10 percent, to settle at 86.32 dollars a barrel on the New York Mercantile Exchange. Brent crude for December delivery also gained and last traded above 109 dollars a barrel.