Oil held near $136 a barrel this afternoon supported by tensions over Iran, but these were offset by International Energy Agency predictions of a more comfortable supply outlook next year.
US crude for August was 15 cents up at $136.20 a barrel by 13.35pm. London Brent crude was 20 cents up at $136.78 a barrel.
Iran tested more missiles in the Gulf today, while the United States pledged to defend its allies. Iran test-fired nine missiles yesterday, which it said included ones that could hit Israel and US bases.
Tensions over Iran have mounted after a big Israeli military exercise last month. The West fears Iran wants to master technology to build nuclear weapons. These tensions boosted gold today, which was also supported by sagging equity markets.
Political tensions in the Middle East have played a part in oil's surge this year to record levels of more than $145 a barrel. But high prices are starting to take their toll on demand.
World oil demand growth will slow in 2009 and the need for oil from the Organization of Petroleum Exporting Countries will fall, the International Energy Agency said in its monthly report.
This could help relieve the perceived tight supply/demand balance in the world oil market that has contributed to around a 50 per cent jump in prices this year.