Around midday, benchmark West Texas Intermediate crude for November delivery was up $1.18, or 1.2 per cent, to US$102.39 a barrel on the New York Mercantile Exchange.
Democratic leader Harry Reid said Senate leaders reached a bipartisan deal to avoid default and end the government shutdown, now in its 16th day. The deal would reopen the government through Jan. 15 and increase its borrowing authority through Feb. 7.
Republican Senator Ted Cruz, who forced the government shutdown, said he won't delay a vote on the budget deal. That was a key concession that signalled a strong possibility that both houses of Congress would act by day's end.
The price of oil has swung back and forth for two weeks as lawmakers attempted to resolve an impasse that has left the government partially closed and the markets worried about the U.S. defaulting on its debt for the first time.
Brent crude's December contract, the benchmark used to set prices for international crudes used by many U.S. refineries, gained 97 cents to US$110.93 on the ICE Futures exchange in London.
In other energy futures trading on Nymex, wholesale gasoline rose five cents to US$2.71 a U.S. gallon (3.79 litres), heating oil gained three cents to US$3.04 a gallon and natural gas added four cents to US$3.83 per 1,000 cubic feet.
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