Oil prices rebounded on Tuesday as a weaker dollar pushed up demand for crude and owing to tensions over the Middle East which offset improved supplies in Libya, analysts said.

Oil prices rebounded on Tuesday as a weaker dollar pushed up demand for crude and owing to tensions over the Middle East which offset improved supplies in Libya, analysts said.

Brent North Sea crude for delivery in September climbed 20 cents to stand at $108.90 a barrel in London afternoon trade.
New York's main contract, West Texas Intermediate for September, rose 38 cents to $106.94.

"Crude oil prices rebounded on Tuesday, supported by a weaker US dollar and on-going tensions in the Middle East," said Myrto Sokou, senior research analyst at Sucden brokers.

Oil prices had fallen on Monday after Libyan petroleum minister Abdelbari al-Aroussi said production in the country's western oilfields had resumed after making progress in ending protests at its main shipping terminals.

Libyan oil exports had plunged by more than 70 percent after protesters, including policemen and border guards, forced the terminals to shut over demands for back pay.

The Libyan protests had exacerbated investors' concerns about a disruption to global oil supply, amid fears that Egypt's ongoing political crisis could force a closure of the Suez Canal and Sumed Pipeline.

"The expectation of a renewed inventory reduction in the US and the latest terror warning issued by the US for north Africa and the Middle East are likely to preclude any sharper fall in prices," Commerzbank analysts said in a note to clients on Tuesday.