Oil held near $49 a barrel on Tuesday as Israel's deepening incursion into Gaza and a dispute between Russia and Ukraine over natural gas heightened concern about supply disruptions.
Tension in the Middle East, supply cuts by OPEC oil exporters and the row between Russia and Ukraine have helped to boost crude prices by about 50 percent from a low of $32.40 on December 19.
"Oil prices continue to be supported by political issues, whether they be gas or Gaza related," Rob Laughlin, broker at MF Global, said.
U.S. crude for February delivery was down 1 cent at $48.80 by 0926 GMT (4:26 a.m. EST), after hitting a three-week high of $49.28 on Monday. London Brent was up 29 cents at $49.91.
On Tuesday, Israeli forces pressed closer and into cities in the Gaza Strip despite new international calls for a ceasefire in an 11-day-old conflict in which hundreds of Palestinians have been killed.
The violence does not directly threaten any oil supplies, but unrest in the Middle East can bolster prices because countries in the region pump about a third of the world's oil.
All supplies of Russian gas via Ukraine to Bulgaria, Turkey, Greece and Macedonia were halted on Tuesday due to a dispute between Moscow and Kiev over gas prices, officials in Sofia said.
The gas row, which mirrors a similar dispute three years ago that also disrupted supplies, is likely to raise questions in Europe about Russia's reliability as a gas supplier. Russia is also a major oil exporter.
Oil has fallen steeply from a record high of $147.27 reached in July as the global downturn eroded demand. Despite the best efforts of policymakers so far, economic indicators have been largely dire.
Toyota Motor Corp said it will shut all its factories in Japan for 11 days and Britain's Nationwide Building Society said house prices in the world's fifth biggest economy fell another 2.5 percent in December.
Fuel inventories are rising as demand slows. A report from the U.S. Energy Information Administration due on Wednesday is forecast to show that supplies of crude, distillates and gasoline increased last week.
The Organization of the Petroleum Exporting Countries has cut output three times since September in a bid to halt the price decline. The latest reduction, of 2.2 million barrels per day from January 1, is its biggest ever cutback.
Kuwait will deepen oil supply curbs to its main customers in Asia later this month, refiner sources said on Tuesday, a measure that adds to evidence OPEC members are tightening the taps.
