Oil rose to $75 a barrel on Monday after a small leak on a spur of Russia's largest oil export pipeline to Europe added to concerns about supply losses in Nigeria and violence in the Middle East.
A branch of Russia's Druzhba pipeline supplying Lithuania suffered a leak over the weekend but had since resumed operations. Renewed tension over major oil exporter Iran's nuclear program also pushed prices up.
"Today's a good illustration of what the market's been driven by recently, which is actual supply disruptions and fears of disruptions," said Craig Pennington, global energy portfolio manager at Schroders. "It's just nervous."
London Brent crude settled up $1.76 to $75.15 a barrel. US crude gained $1.16 at $74.40.
Druzhba is the largest of Russia's export pipelines to Europe, with a capacity of up to 1.4 million barrels per day, according to the US Energy Information Administration.
The leak occurred on Saturday in the Bryansk region of western Russia bordering on Belarus, where the pipeline splits into two branches, with the bigger section heading to Poland and Germany and the other to Lithuania.
Exports to Lithuania were disrupted when 48 cubic meters of crude leaked out.
The leak had been patched up and the line began working again on Monday morning, Russia's Emergencies Ministry and the Druzhba pipeline operator told Reuters.
US crude was within sight of a July 14 record high of $78.40, boosted by supply losses in Nigeria, Iran's nuclear dispute with the West and fears that the conflict between Israel and Hezbollah in Lebanon could spread.
Oil prices are sensitive to real and threatened supply breaks because rising global demand has used up much of the reserve output capacity among the world's producers.
"In the face of a few hours, you have a real supply disruption, which is the Druzhba pipeline, and then you have a perceived one, which is the Iranian issue," Pennington said.
The UN Security Council on Monday demanded that Iran suspend its nuclear activities by the end of August or face the threat of sanctions.
The dispute has helped to power oil's 21 percent rally in New York this year as it has raised worries the dispute could cut supply from the world's fourth-largest oil exporter.
Prices also rose as Israel planned to step up its offensive against Hezbollah guerrillas until an international force deploys in southern Lebanon, despite calls for an immediate truce.
The 20-day-old conflict has worried traders because the Middle East pumps almost a third of the world's oil, though neither Lebanon nor Israel is a producer.
US Secretary of State Condoleezza Rice said Monday she expected a cease-fire could be forged this week.
Also boosting oil prices, Royal Dutch Shell lifted an estimate of supply shut down in Nigeria, Africa's top producer. In all, a quarter of Nigeria's production capacity has been disrupted by militant attacks and pipeline leaks.
But Agip resumed operations at an oil flow station in southern Nigeria, after a five-day siege by armed youths ended with no damage to the facility, the company said.
SINGAPORE: Oil held steady above $73 a barrel on Monday, with traders torn between hope for a Middle East truce and fear of escalation after the bloodiest attack in the nearly three-week war between Israel and Hizbollah.
US light, sweet crude for September delivery slipped 6 cents to $73.18 a barrel by 0531 GMT after sliding $1.30 on Friday. London ICE Brent crude rose 4 cents to $73.43.
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