Recovery in crude prices is supported by threats to Middle East supplies
Oil rose to $62 a barrel on Tuesday, close to its 2015 high, supported by threats to Middle East supplies and expectations lower prices may prompt a slowdown in US output.
Egypt on Monday bombed ISIL targets in Libya, where violence has reined in most oil output, and Iraq's semi-autonomous Kurdistan Regional Government threatened to withhold oil exports if Baghdad failed to send its share of the budget.
"The low oil prices are forcing a reduction of drilling rigs in the US but also of budgets in oil-exporting countries," said Olivier Jakob, oil analyst at Petromatrix.
"Libya is already mostly out in terms of production. Libya and Yemen are getting closer to the day of outside military intervention."
Brent crude rose 65 cents to $62.05 a barrel by 0949 GMT. It reached a 2015 high of $62.57 on Monday. US crude was 60 cents higher at $53.38 a barrel.
Oil prices collapsed in the second half of 2014 on oversupply. The Organisation of the Petroleum Exporting Countries refused to cut its output, choosing to defend market share against US shale oil and other competing sources.
Brent has jumped by almost 40 percent in the last four weeks, supported by a sharp fall in US oil drilling. It had reached $45.19 on Jan. 13, the lowest in almost six years, down from $115 in June.
The threat to Iraq's northern exports from the revenue dispute arises as bad weather has cut Iraq's southern shipments this month.
With risks to Middle East supply back on the market's radar, International Energy Agency Chief Economist Fatih Birol warned the rise of ISIL in Iraq and Syria presented a major challenge for the investment necessary to prevent an oil shortage in the next decade.
"The appetite for investments in the Middle East is close to zero, mainly as a result of the unpredictability of the region," he said.
Even so, some analysts see the rally as overblown as the market remains oversupplied in the first half of the year.
"We think the market is already reading too much into this," said Eugen Weinberg, an analyst at Commerzbank. "The price action is premature."