Oil held steady near $75 on Tuesday as dealers remained on edge over geopolitical tensions in the Middle East and after heat waves in the United States and Europe triggered a surge in natural gas prices. US light sweet crude for September delivery slipped 5 cents to $74.35 a barrel by 0723 GMT after gaining $1.16 on Monday.
London ICE Brent crude L shed 22 cents to $74.93 a barrel, having widened its premium to US crude on fears that a small pipeline leak on a branch of Russia's biggest oil pipeline to Europe could curtail supplies. Russian officials said later that deliveries to Europe via the main line were unaffected by the spill.
The conflict in Lebanon between Israel and Hizbollah, as well as the dispute over Iran's nuclear programme, has kept traders worried over exports from the region, which pumps a third of the world's crude.
US Secretary of State Condoleezza Rice had said she believed a cease-fire could be forged for the 21-day-old war between Israel and militant group Hizbollah this week, with the formation of an international stabilisation force.
However, the Israeli government has given the green light for its troops to widen its ground offensive and push deeper into Lebanese territory, while Syria has put its troops on a state of alert, possibly leading to an escalation in hostilities.
"I don't think there will be any quick and easy resolution to either situation. Even if the UN peacekeepers go into Lebanon, it will just mean that there's a third group stuck in the quagmire," said Tony Nunan, a manager with Japan's Mitsubishi Corp in Tokyo.
The UN Security Council had demanded that Iran suspend its nuclear activities by the end of August or face the threat of sanctions, setting a new deadline in a row that has been a key part of oil's 21 percent rally so far this year.
"The best-case scenario... would be that negotiations continue and become more protracted, while the worst-case would be that things turn nastier. Whatever it is, it doesn't seem that there will be a quick solution," Nunan said.
A more than 14 percent surge in US natural gas prices on Monday following several nuclear plant outages and a nation-wide heatwave also helped lift the energy complex, possibly shifting some power generation demand back to oil products.
September natural gas futures soared to their highest since April and gained another 0.47 percent to $8.25 per million British thermal units (mmBtu) on Tuesday.
US crude stocks were forecast to fall by 1 million barrels last week as imports dropped and refinery runs rebounded, while gasoline dwindled by 1.7 million barrels amid refinery troubles and firm demand, with more than a month go to before the summer driving season ends, a Reuters poll found.