Prolonged fighting in Iraq, Nigerian unrest contribute to solid advance for Brent crude.

More gains for oil futures March 25, 2003: 11:33 AM EST

LONDON (Reuters) - World oil prices extended gains Tuesday as Iraq resisted a U.S. military thrust toward Baghdad and tribal violence in Nigeria kept shut nearly 40 percent of the country's crude output.

U.S. light crude gained 61 cents to $29.27 a barrel after a $1.75 jump Monday. London Brent crude added 45 cents to $26.54 a barrel.

U.S. and British forces faced tough resistance from Iraqi fighters as they opened an assault on Republican Guards defending approaches to Baghdad, the Iraqi capital, in a campaign aimed to oust President Saddam Hussein.

Oil fell 25 percent last week as traders bet on a short war with little damage to Iraq's oil industry, which exported 1.7 million barrels a day to the 77 million bpd world market before the conflict.

But confidence in a quick war waned after the weekend as U.S. and British forces suffered casualties and saw slower progress.

"The market is responding to difficulties in the Iraq campaign. It had priced in the perfect war and had gone so far as building in a victory discount, which is now being eroded," Sydney, Australia-based oil analyst Simon Games-Thomas said.

A series of bloody clashes in Nigeria forced closure at the weekend of just over 800,000 barrels per day (bpd) of the 2.2 million bpd produced by Western oil firms in the African OPEC nation.

Ethnic groups in the Niger Delta are battling for a greater share of the country's oil wealth.

Nigeria is one of the top six oil exporters to the United States, where fuel supplies have been running at 27-year lows partly due to a Venezuelan general strike.

Nigeria averaged 560,000 bpd to U.S. refiners last year, where its crude is valued for its high gasoline content. Nigeria also exports to Europe and Asia.

"Nigerian crude is not the kind of stuff you want to be short of," said Paul Horsnell, oil analyst at J.P. Morgan. "It's very serious. It's not a little local disturbance."

The Organization of the Petroleum Exporting Countries could make up any shortfall in supply from Nigeria, OPEC's fifth largest producer, OPEC President Abdullah al-Attiyah said Monday.

The group has also pledged to make up for the disruption to Iraqi exports but now has only the slimmest of spare capacity cushions.