Libya's National Oil Company yesterday stopped the relaunch of production at its two biggest oil fields after a militia threatened to block the crude from reaching the market.
The fields, known as El Feel and Sharara, are based in the west of the country.
Libya, a member of the 13-country cartel Organisation of the Petroleum Exporting Countries (Opec), is being watched closely by oil traders as it is exempt from a recent Opec agreement to slash production next year.
Global benchmark Brent crude was trading up 0.5 per cent to $55.49 a barrel, while US benchmark West Texas Intermediate crude was up 0.6 per cent at $52.22.
The Opec deal, agreed at the end of November, will cut production among member countries by 1.2m barrels per day (bpd) during the first half of next year.
This will be bolstered by a second deal with non-Opec oil producers to slash production by 558,000 bpd. Brent crude hit a temporary high of $57 a barrel after the deal, which was the first between Opec and non-Opec producers in 15 years.
Front-month crude futures have been trading up today in expectation of a tighter oil market next year as a result of the deal, which is hoped will counter a massive supply glut that has weighed on prices since 2014.
A fall in the dollar, which has lost 0.8 per cent against a basket of other leading currencies, has also allowed prices to rise.
Swings in the dollar can affect oil demand as they influence fuel prices for any country using its own currency domestically. Last week, the greenback reached its highest level since 2002.