Oil steadied above $124 a barrel yesterday, despite attacks by rebels on the oil industry in key producer Nigeria.
The main militant group in Nigeria's oil-producing Niger Delta said on Monday it had attacked two major crude oil pipelines belonging to Royal Dutch Shell.
Shell said it was investigating an apparent attack on its Nembe Creek crude oil pipeline but could not confirm whether any production was affected. The incident followed the kidnapping of foreign oil workers in Nigeria last week and security concerns in Turkey at the weekend.
Five Russian oil workers kidnapped from a vessel off the Niger Delta have been released unharmed, a senior state security official said on Monday. US light crude rose $1.49 to $124.75 a barrel by 0930 GMT.
London Brent crude rose $1.43 to $125.95.
"We have opened modestly higher on some geopolitical headlines," MF Global said in a research note.
Oil has fallen more than $23, or about 16 per cent, from record highs above $147 struck on July 11. The latest gains were limited as recent reports have shown fuel demand in the United States and other industrialised nations was sliding.
"It has a limited impact on the market", a broker said, referring to the sabotage attacks to the Nigerian pipelines.
Data from the Commodity Futures Trading Commission released on Friday also showed that speculative funds were shifting to a net short position for the first time in 17 months.
News from Iran has also provided some support to the oil price. At the weekend, Iran's Opec governor said world oil prices could reach as high as $500 per barrel in a few years' time if the US dollar falls further and political tension worsens.