* Greece opinion polls support pro-bailout government
* Euro off two-year lows as Greece exit fears ease
* Lack of progress in Iran nuclear talks underpin prices
By Christopher Johnson
LONDON, May 28 (Reuters) - Oil rose above $107 per barrel on Monday as fears of a euro zone break-up receded but Middle East oil supply worries resurfaced after minimal progress in talks over Iran’s nuclear programme.
Opinion polls suggested Greece’s pro-bailout conservatives could win elections on June 17, keeping the country in the euro zone and making a swift collapse of the currency bloc less likely.
Fears of a war in the Gulf that could threaten global oil supplies have returned after world powers failed to convince Iran last week to halt its most sensitive nuclear work.
Tension between Iran and the West remains high ahead of more talks in Moscow next month to try to end the stand-off.
In markets thinned by public holidays across Europe and Memorial day in the United States, Brent gained for a third session in a row, supported by a weaker dollar.
July Brent futures hit a high of $108.04, up $1.24, before easing back to trade around $107.62 by 1506 GMT. U.S. crude oil futures also rose more than $1 to an intra-day high of $91.99.
“The latest Greek opinion polls are being seen as a positive and a lack of progress in the Iranian talks have also helped lift the market,” said Christopher Bellew at brokerage Jefferies Bache in London.
Ben Taylor, a trader at CMC markets, said news from Greece was key to commodities markets.
“The idea that Greece will stay within the euro zone calms the market,” said Taylor. “A move towards creating a common euro bond, and stimulating the economy through growth-related policies versus austerity are factors that will be positive.”
Surveys over the weekend showed Greece’s New Democracy party has regained an opinion poll lead, which could see the formation of a government determined to keep on good terms with its European partners.
A conservative government would attempt to impose tough austerity conditions attached to a 130 billion euro bailout agreed with the EU and International Monetary Fund in March.
The euro bounced off two-year lows in Asian trade on Monday, hitting $1.2590 and pulling away from Friday’s 1.2495, its lowest level since July 2010.
Despite recent gains, oil has fallen sharply this month with Brent down more than 12 percent. The front-month Brent contract is off about 16 percent from this year’s high above $128 reached at the beginning of March.
Large speculators in crude oil futures and options markets have cut net long positions this month, easing back on assets deemed risky. Exchange data on Monday showed Brent net longs have been trimmed for three consecutive weeks.
Investors say a key risk for the oil market is tension over Iran’s nuclear programme, which Washington and its allies believe is designed to produce an atomic weapon.
A dispute between Iran and the West intensified over the weekend after Tehran refused to allow the International Atomic Energy Agency (IAEA) to visit a nuclear site suspected of being used to develop nuclear weapons.
A report by the U.N watchdog last week said satellite images showed “extensive activities” at the Parchin complex, located southeast of Tehran. Iran says the complex is a military site.
The U.S.-based Institute for Science and International Security think-tank has said there is concern Iran may be trying to cleanse the building at Parchin - possibly by grinding down surfaces, collecting the dust and washing the area thoroughly.
“Any escalation of tensions involving Iran is going to push up the risk premium and put the market on edge,” Taylor said.