Brent crude oil rose towards $110 per barrel after oil exports from Libya fell to their lowest for two years.
The fall heightened supply worries ahead of scheduled cuts in output from fellow OPEC member Iraq.
Striking security guards shut Libya's two biggest crude export terminals on Monday, hours after they had reopened, and more oilfields have closed in a wave of protest that has swept the North African oil producer.
Libya's deputy oil minister said exports could resume as early as Thursday after workers and local authorities reached an agreement to end the strike.
But the OPEC exporter said it could not make any promises to clients now about its deliveries of crude next month due to the on-off strikes.
Markets worried supplies could be insufficient to meet demand due to restocking before the northern hemisphere winter.
"Supply issues are keeping the market on edge," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Brent crude oil futures for September rose 36 cents to $109.33 per barrel while US light crude oil erased early gains to trade $0.16 lower at $106.11.
Brent touched a low of $107.43 a barrel on Monday, but rose back above its 200-day moving average at $108.16, a technical marker watched by traders. Brent last traded above $110 a barrel on Aug. 2.
Libyan oil output has fallen to its lowest since the overthrow of dictator Muammar Gaddafi, with the country's total oil production well below 500,000 barrels per day (bpd), down from 1.3 million bpd in June, industry analysts say. OPEC/O
"We think Libyan production is down around 0.4 million bpd," Richard Mallinson, chief policy analyst at London-based consultancy Energy Aspects, told Reuters Global Oil Forum. "Exports would be even lower at around 0.3 million bpd."
Maintenance work at Iraq's key southern oil export hub is expected to cut supplies by 500,000 bpd in September, lending further support to prices in the medium term.
Higher oil prices are already taking their toll on oil refiners in Europe, who are expected to cut their processing rates by around 500,000 bpd this week on poor profit margins.
