SINGAPORE: Brent crude futures were supported near $115 on Tuesday by supply concerns triggered by the spreading unrest in the Middle East, while uncertainty about demand from the world's No. 3 consumer Japan capped gains.
Anti-aircraft fire rang out across Tripoli for a third night on Monday, but air attacks on Libya are likely to slow, a US general said, as Washington holds back from being sucked into the Libyan civil war.
"It now seems likely that there will be a significant loss of Libyan oil supplies for some time," said Ric Spooner, chief market analyst at CMC Markets.
"This will reduce the buffer of excess capacity and increase the oil market's vulnerability to any new supply shocks which may emerge. "This may see a risk premium being maintained in the oil price for some time."
Brent crude for May gained 7 cents to $115.03 a barrel at 0316 GMT, less than $5 from a 2-1/2-year high near $120 reached last month. US crude for April rose 17 cents to $102.50.
Rebels, who had been driven back towards their eastern Benghazi stronghold before the air attacks halted an advance by Gaddafi's forces, have so far done little to capitalise on the campaign -- raising fears the war could grind to a stalemate.
Oil prices rose about 1 percent on Monday, the first day of trading after the UN-backed military campaign in Libya started. Total crude trading volumes remained well below average, continuing last week's trend and underscoring the uncertainty facing the market and diminished open interest, brokers and analysts said.
U.K. Prime Minister David Cameron tried to reassure a war-weary public on Monday that Britain's military involvement in Libya will not drag it into another Iraq-style conflict.
In Yemen, top generals, ambassadors and some tribes threw their support behind anti-government protesters in a major blow to President Ali Abdullah Saleh's efforts to ride out demands for his immediate exit.
Meanwhile, unrest spread in southern Syria on with hundreds of people demonstrating against the government in three towns near the main city of Deraa, but authorities did not use force to quell the latest protests.
In Japan, the No. 1 reactor at the quake-stricken nuclear power plant in Fukushima is now able to receive power from the grid, Kyodo news agency reported on Tuesday, citing the plant's operator.
The reconnection of power at the earthquake-damaged reactors in Japan is a big step in managing the nuclear crisis, experts said, but concerns about radiation in the air, seawater and food showed the dangers are far from over.
Japan will allow the release of an additional 22 days worth of crude oil from privately held reserves, the trade ministry said. The trade ministry had already allowed the release of 1.26 million kilolitres from reserves, or three days worth of demand, last week.
Also supportive to products were analyst expectations that weekly reports on US oil inventories will show gasoline and distillate stockpiles fell last week.
Industry group the American Petroleum Institute will publish inventory statistics for the week ended March 18 on Tuesday, followed by US government data from the Energy Information Administration on Wednesday.
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