A U.S. budget deal would help avoid what has been called the "fiscal cliff," which could be caused by automatic tax increases and spending cuts. In recent days, Republican and Democratic lawmakers have expressed optimism a deal will be reached.

U.S. Treasury Secretary Timothy Geithner, the head budget negotiator for President Barack Obama, met congressional leaders on Thursday, although House Speaker John Boehner, a Republican, said talks have made "no substantive progress."

Oil also rose as the dollar weakened on Thursday against other currencies, making dollar-denominated crude cheaper for holders of other currencies, U.S. equities rose and escalating violence and political tension in Syria and Egypt kept oil traders wary of supply disruptions.

Crude futures pushed higher after three straight lower settlements, putting Brent and U.S. crude futures on pace to post monthly gains of around 2 percent.

"The developments in the Middle East keep pumping up the security premium and that is helping push crude higher along with the hopes that a fiscal deal can be reached in Washington," said John Kilduff, partner at hedge fund Again Capital LLC in New York.

Brent January crude rose $1.25 a barrel to settle at$110.76, topping its 50-day moving average price of $110.58.

Earlier on Thursday, Brent's $111.30 session peak was near a 200-day moving average of $111.47, another technical level monitored by chart watchers. A breach of key moving average levels can sometimes add momentum to trading, propelling prices further.

U.S. January crude settled up $1.58 at $88.07 a barrel. Earlier on Thursday, U.S. crude traded as high as $88.69 a barrel, reaching its 50-day moving average.

"A dose of optimism toward resolution of the fiscal cliff issue appeared to bring in some speculative buying interest," Illinois-based energy analyst Jim Ritterbusch wrote in a note.

Other commodities also rose on Thursday, with copper, a major economic bellwether, reaching its highest price in more than a month.

President Barack Obama and Boehner, the top Republican in Congress, both expressed hopes on Wednesday that a budget deal could be reached, although Boehner's comments on Thursday, when he accused Democrats of failing to "get serious" about a deal, were less optimistic.

Data released on Thursday showed the U.S. economy grew faster than initially thought in the third quarter, but consumer and business spending were revised lower in a reminder of the recovery's underlying weakness.

Oil output from OPEC member countries has declined in November to its lowest since January because of disruptions to Nigerian output and reduced supplies from Angola and Libya, a Reuters survey found on Thursday.

Supply from the 12-member Organization of the Petroleum Exporting Countries has averaged 31.06 million barrels per day (bpd), down from 31.15 million bpd in October, the survey of sources at oil companies, OPEC officials and analysts found.

OPEC is likely to keep its current output target of 30 million barrels per day when its members meet next month, OPEC delegates told Reuters.

MIDDLE EAST TURMOIL

In Egypt, two people have been killed and hundreds injured in countrywide protests ignited by the decree that embattled President Mohamed Mursi issued last Thursday that gave him sweeping powers and placed them beyond legal challenge.

On Thursday, an alliance of Egyptian opposition groups pledged to keep up protests against Mursi and said broader civil disobedience was possible to fight what it described as an attempt to "kidnap Egypt from its people."

The U.N. nuclear agency made no progress in a year-long push to find out if Iran worked on developing an atomic bomb, its chief said on Thursday, calling for urgent efforts to end Tehran's standoff with the West.

Israel and its Western allies accuse Iran of trying to develop a nuclear weapon, while Tehran insists its nuclear program is purely for civilian use.