Oil surged more than 2% on concerns that a tropical disturbance in the Caribbean Sea may develop into a storm and threaten Gulf of Mexico production.
US crude futures were up $2.12, or 2.7%, at $78.63 a barrel, having traded as high as $78.92, which matched Monday's intraday high.
Crude had bounced from a session low of $75.90.
ICE Brent crude futures were up $1.52, or 1.99%, at $77.99, off a $78.32 high.
Trading sources said buy stop orders were triggered when crude moved back toward $79 and that US gasoline futures also rose sharply.
A low-pressure area over the western Caribbean Sea now has a high 70% chance of developing into a tropical depression over the next 48 hours, the US National Hurricane Center said.
Some weather models project the system will cross Mexico's Yucatan Peninsula over the next few days before entering the central Gulf of Mexico, threatening BP efforts to clean up its oil spill.
