Crude prices rose on Tuesday as a U.S. energy report saw rising oil demand in 2012 and investors raised concerns about possible Iranian end to crude exports to counter economic sanctions.

Recently, U.S. crude prices were heavily burdened by the tepid domestic demand. But market sentiment on Tuesday was clearly lifted after the U.S. Energy Information Administration (EIA) raised its 2012 oil demand forecast by 50,000 barrels a day.

Meanwhile, worries that Iran may halt oil exports to the European Union and that the ongoing cold weather would widen the demand-supply gap in Europe pushed crude prices higher.

A weaker U.S. dollar also contributed to oil's gains. Investors breathed a sigh of relief after an agreement was reached in Greece debt talks. The euro rose to its eight-week high against the dollar, prompting the dollar index to fall about 0.7 percent.

Light, sweet crude for March delivery gained 1.50 dollars, or 1. 55 percent to settle at 98.41 dollars a barrel on the New York Mercantile Exchange. In London, Brent crude also rose and last traded above 116 dollars a barrel.