Brent crude oil held its ground around $109 a barrel on Thursday as rising tensions in Egypt stoked supply fears, offsetting concerns over the demand outlook.

Brent crude was up 7 cents at $108.88 a barrel by 1129 GMT, after dropping for the past three sessions. U.S. crude rose 12 cents to $88 a barrel.

"We have supply risks due to geopolitical tensions in the Middle East," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

"Alongside Egypt, Syria, Gaza and Iran all remain latent trouble spots, thus justifying a risk premium on the oil price."

Supporters of Egypt's Mohamed Mursi and opponents of the Islamist president clashed in an outbreak of stone-throwing near the presidential palace in Cairo on Thursday despite the deployment of army tanks.

There have been seven deaths and 350 people wounded, officials said, in the violence that started on Wednesday night, underlining the scale of the conflict in the Egyptian capital and other cities.

Israel is also in focus with its plans to build more settler homes in the West Bank, prompting the European Union to summon Israel's envoy.

U.S. fears of Syrian President Bashar al-Assad using chemical weapons and Iran saying that the U.S. was spying on its military sites and oil terminals added to concerns that supplies from the region could be disrupted.

Washington said there was no evidence to support Iran's assertion.

Prices of riskier assets such as oil were supported by comments from U.S. President Barack Obama that a deal to avert the so-called fiscal cliff was possible in "about a week" if Republicans compromised on taxes.


The United States faces year-end tax increases and spending cuts that threaten to push the world's largest economy back into recession and dent demand from the world's top oil consumer.

Ahead of the country's monthly non-farm payrolls, due on Friday, private payrolls processor ADP reported that private-sector employers added 118,000 jobs in November, fewer than expected, though activity in the service sector continued to expand.

"The wider range is likely to prevail a little longer in cautious (oil) trading ahead of the U.S. November jobs report on Friday," VTB Capital's Andrey Kryuchenkov said.

Oil faced pressure after a U.S. inventory report showed big builds in oil products, with gasoline stocks up by the highest margin since September 2001, surging by 7.86 million barrels to 212.12 million barrels in the week to Nov. 30.

The U.S. Energy Information Administration said that U.S. stocks of distillates - diesel and heating oil - also rose at a time of the year when refined oil stocks often fall.

Across the Atlantic, data showing that euro zone shoppers cut back on spending in October by the biggest margin in six months also weighed on oil prices.

Although the European Central Bank is likely to keep interest rates on hold, markets are eyeing its meeting on Thursday for clues on future policy. (Additional reporting by Ramya Venugopal in Singapore; Editing by Christopher Johnson and David Goodman)