New York, Aug. 21 (Reuters): Oil prices rose nearly 5 per cent on Thursday, the biggest gain in more than two months, driven by rising tensions between the US and energy behemoth Russia.

The gains cap a rebound of more than $8 in oil prices so far this week that have put a dramatic end to a more than 20 per cent slide since mid-July, leaving analysts doubtful about oil’s next big move.

“This is a geopolitically driven bounce,” said an analyst. “But it might be premature to say that we’ve seen the bottom as the market’s focus could revert quickly to demand deterioration.”

US crude gained $5.60, or 4.85 per cent, to stand at $121.16 a barrel by 1645 GMT, the biggest percentage gain since June 6. London Brent crude climbed $6.11 to $120.47.

Oil is down sharply from the record high of $147.27 a barrel reached on July 11 — a slide triggered by evidence of a global slowdown in energy demand — but it remains up about 20 per cent so far this year and about six-fold since 2002.

Thursday’s gains came after Russia said it would respond with more than just a diplomatic protest to a US deal with Poland to station parts of a US missile defense shield on Polish soil.

Dealers were also eyeing the Opec and Saudi Arabia, its top producer, for signs they may decide to trim supply. Opec meets on September 9 to review output policy.

Adding support to oil and other commodities was weakness in the US dollar, which can raise the purchasing power of buyers using other currencies.