Oil prices paused their recent advances, receding in Asian trading on Tuesday after surging more than 7% in the previous three sessions on supply concerns prompted by fears of a wider Middle East conflict and the shutdown of Libyan oil fields.

Brent crude futures fell 32 cents, or 0.39%, to $81.11 a barrel at 0154 GMT, while U.S. West Texas Intermediate crude futures fell 36 cents, or 0.46%, to $77.06 a barrel.

Oil markets are retracing slightly after sharp gains in the previous three sessions driven by expectations of U.S. interest rate cuts that could boost fuel demand , military assaults between Israel and Hezbollah in Lebanon over the weekend that threaten a wider Middle East conflict potentially disrupting supply from the key producing region and the Libyan closures.

Over that period, WTI gained 7.6% and Brent gained 7%. "Markets remain on edge as skirmishes between Israel and Hezbollah intensify," ANZ analysts said in a note.

"The risk of disruption to actual barrels of oil became real after Libya's eastern government said it will halt all oil production and exports as a political tussle deepened.

" That political dispute could affect up to 1.17 million barrels per day of output from the North African country, based on data from the latest Reuters survey of production by the Organization of Petroleum Exporting Countries in July.

Oil has also been supported by the escalation of the conflict between Israel and Hezbollah, with a major exchange of missiles between them as Hezbollah attempts to retaliate for the killing of a senior commander last month.

A top U.S. general said on Monday the danger of a broader had eased somewhat but that a potential Iran strike on Israel remains a risk.

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