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World oil prices inched upwards on Tuesday in a subdued market after Moody's warned it could downgrade ratings on three top-rated eurozone members amid continued international tensions.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for delivery in March, gained 51 cents to $101.42 a barrel.

Brent North Sea crude for March delivery meanwhile rose 7 cents to $118.00 in midday London deals.

Moody's on Monday wielded the axe on the debt ratings of Italy, Spain, Portugal, Slovenia, Slovakia and Malta while placing France, Britain and Austria on warning, saying they were vulnerable to the eurozone crisis.

The ratings agency cited the region's weak economic prospects as threatening “the implementation of domestic austerity programs and the structural reforms that are needed to promote competitiveness”.

Andrey Kryuchenkov of VTB Capital said: “A retreat in the euro weighed on Brent ... as well as improving temperatures in Europe following the sudden cold snap in the past week.”

But market players “continue to watch eurozone developments this week,” he said.

Oil prices had surged on Monday after Greek lawmakers pushed through a package of dramatic austerity cuts late Sunday to secure another Europe-sponsored bailout and avoid a devastating default on its mountain of debt.

Kryuchenkov said “market participants paid some attention to escalating tensions between Israel and Iran over the weekend after Israel accused Tehran of involvement in recent ... bomb attacks on its embassies in India and Georgia.”

On Monday a car outside the Israeli embassy in New Delhi exploded in a ball of fire, injuring two people, one of whom was an Israeli woman. A second incident targeted an embassy car in Tbilisi, but the bomb was discovered and defused. - Sapa-AFP