Oil rose above $70 a barrel on Thursday, adding to sharp gains the previous session, on rising tensions in the Middle East and supply concerns in the United States.

London Brent crude, currently seen as the best indicator of the global market, climbed 46 cents to $70.40 a barrel by 1100 GMT. U.S. crude rose 20 cents at $66.46.

There are a lot of medium term issues, mostly geopolitical, that are making it difficult for the market to sell lower, said Geoff Pyne, analyst at London-based Enerpy Ltd.

In the Middle East, Hamas fighters bombarded a major security compound belonging to the rival Fatah group in Gaza City as the Islamist movement appeared to tighten its grip on the territory in fierce factional fighting.

The Middle East violence added to an already edgy market over supply disruptions in Nigeria and Iran's atomic program.

European powers warned Tehran on Wednesday that it faced a possible third round of broader sanctions for expanding uranium enrichment and curbing U.N. inspectors' access to its nuclear program.

Separately, Iranian President Mahmoud Ahmadinejad reiterated his defiance to the threat of further action, saying Iran does not give the slightest value to your resolution.

Oil prices rallied more than a dollar on Wednesday after a U.S. government report showed gasoline and heating oil stocks were well below normal in the world's top consumer.

U.S. heating oil led the gains after a steep fall in supplies over the week left stocks well below year ago levels. Gasoline stocks, keenly watched because of peak summer, were flat. Analysts had expected a sixth consecutive build.

Seasonal oil product inventory building was already slow in May. It ground to a virtual halt the first week of June, said UBS analyst Jan Stuart in a report, noting total fuel stocks against oil demand stood 4 percent below the five-year average.

The heating oil premium to crude surged by more than $1 as traders grew concerned that refiners' efforts to maximize gasoline production could keep heating fuel stocks thin through the summer, leading to a scramble for pre-winter supplies.