Fear of wider Middle East conflict spurs buying
Protests lead to output disruptions in Libya
Financial markets recover from recent selloff
US gasoline demand likely above 9 million bpd last week UBS

NEW YORK, Aug 6 Reuters Oil prices rose about 1 in volatile trade on Tuesday, bouncing off multimonth lows hit in the previous session, as investor attention turned to supply tightness and financial markets recovered from their recent slump.

Brent crude futures were up 55 cents, or 0.7, to 76.85 a barrel at 134 p.m. ET 1734 GMT. U.S. West Texas Intermediate futures were up 62 cents, or 0.9, to 73.56 per barrel.

Iran39;s vow of retaliation against Israel and the U.S. following the killing of two militant leaders has raised concerns that a wider war is brewing in the Middle East, which could have a direct impact on supplies from the region.

Lower production at Libya39;s 300,000 barrelperday Sharara oilfield is also adding to concerns of supply shortages. Libya39;s National Oil Corp said on Tuesday it would start to gradually decrease production at the field due to protests.

Recent declines in crude oil and fuel inventories at major trading hubs are also supporting oil prices.

Oil fundamentals are still suggesting an undersupplied oil market, with oil inventories still falling, UBS analyst Giovanni Staunovo said.

Global oil inventories decreased by around 400,000 barrels per day bpd in the first half this year, according to U.S. Energy Information Administration EIA…