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November 22 2012, 00:46AM

Oil prices have jumped as renewed violence between Israel and Gaza dims hopes of a ceasefire and easing Middle East supply concerns, while traders look ahead to US energy inventory data.

Dealers said gains were being capped by news that eurozone ministers had failed to reach a deal over debt-plagued Greece's latest instalment of bailout funding.

The price of Brent North Sea crude for delivery in January rallied $1.45 to $111.28 a barrel in London midday deals.

New York's main contract, light sweet crude for January or West Texas Intermediate (WTI), advanced $1.03 to $US87.78 ($A84.92) a barrel.

Prices jolted higher as a blast ripped through a bus in Tel Aviv, injuring 17 people in what Israel said was a "terrorist" attack, further vexing international efforts to end relentless Gaza-linked violence.

"Oil prices... posted renewed gains on Wednesday, as persistent concerns about Middle East tensions dominated the oil market," said analyst Myrto Sokou at brokerage Sucden Financial Research.

The bus attack came as Hamas-controlled Gaza was rocked by new Israeli air strikes and as US Secretary of State Hillary Clinton and UN chief Ban Ki-moon shuttled between Jerusalem and Ramallah to secure a halt to the bloodletting.

Crude futures had slumped on Tuesday on expectations of a truce between Israel and Gaza, while sentiment was also dented by fresh economic strains in Europe.

Oil prices had on Monday surged about $2.00 a barrel to strike one-month highs as Israel stepped up its assault on Gaza.

But markets pulled lower on Tuesday, also after Moody's stripped France of its prized triple-A sovereign rating, warning that it was vulnerable to more deterioration in troubled eurozone nations.

Later on Wednesday, the US government's Department of Energy was to post its weekly report on energy reserves, for the week ending November 16.

American crude stockpiles were expected to have risen by 800,000 barrels, according to analysts polled by Dow Jones Newswires.

Market reaction to the data was set to be muted ahead of the Thanksgiving holiday on Thursday, when all financial markets shut in the United States.