Oil prices were higher in Asian trade on Monday after weekend talks in Geneva aimed at convincing Iran to halt its nuclear programme made little progress, dealers said.
In late morning trade, New York's main contract, light sweet crude for August delivery, rose 93 cents to $129.81 a barrel. Brent North Sea crude for September delivery added 99 cents to $131.18.
Investors are again watching tension in the oil-rich Middle East after the Iranian talks stalled.
The US and other major powers suspect Iran's nuclear drive aims at making weapons, whereas Tehran insists its objective is only energy production.
"The weekend meeting involving Iran really didn't resolve the issues surrounding the nuclear programme so the geopolitical risk premium has increased," said Commonwealth Bank of Australia strategist David Moore.
"I think that was the factor behind the lift in prices," he said from Sydney.
US Secretary of State Condoleezza Rice upped the pressure on Tehran on Monday, warning Iran had two weeks to respond seriously to an international offer to halt its sensitive nuclear work or face further "punitive measures."
The Geneva meeting sent a "very strong message to the Iranians that they can't go and stall ... and that they have to make a decision," Rice told reporters travelling with her to the Middle East.
The Islamic republic is the world's fourth-biggest producer of crude oil, and tension over its nuclear effort have helped push prices to record highs recently.
Washington's decision to send Under Secretary of State William Burns to the talks marked a major US policy shift, which has not had diplomatic relations with Iran since 1980.
Analysts have said the shift was one of the factors that helped to explain a plunge in oil prices last week.
Crude prices eased last Friday, capping a fall of more than $16 in a week. They have plummeted since striking record highs above 147 dollars per barrel earlier in July.
Analysts said worries that a US-led world economic slowdown would hit energy demand were likely the key reason for the decline.
Earlier this month the Organisation of the Petroleum Exporting Countries (OPEC) revised down its forecast for 2008 world oil demand growth to 1.20 percent from 1.28 per cent, citing the economic slowdown and high fuel prices.
"The new price structure and slower world economy have helped dampen oil demand growth in many regions," it said in its monthly report.
The surge in fuel costs has led to protests worldwide, ranging from tens of thousands of truck drivers striking in Spain and Portugal, to street rallies throughout Asia over hikes in subsidised energy costs.
World oil prices remain high by historical standards despite last week's plunge, having traded as low as under ten dollars per barrel in the late 1990s.
The elevated cost of black gold continues to fan fears of high inflation and slower economic expansion.