SINGAPORE/LONDON (Reuters) – Oil rose to almost $72 a barrel on Monday after major exporter Iran said it would not suspend its nuclear program as its self-imposed deadline to respond formally to Western proposals drew near.
The world’s fourth-largest oil exporter said on Sunday it would not suspend uranium enrichment, ruling out the main demand in a package backed by six world powers. Iran plans to reply in full by Tuesday.
“The Iranian situation is obviously going to cause some concern over the next few days,” said Kevin Norrish, oil analyst at Barclays Capital. “Overall, the downside appears to be over for the time being.”
U.S. crude was up 65 cents at $71.79 a barrel by 1001 GMT. London Brent crude rose 93 cents to $73.23.
The United Nations Security Council has demanded that Iran halt its nuclear work by a second deadline of August 31, raising the prospect of punitive action by the U.N. with possible repercussions on the flow of oil.
The United States, Russia, China, France, Britain and Germany have offered incentives for Iran to suspend enrichment. Tehran, which insists its nuclear aims are purely civilian, shows no sign of accepting the package.
Oil has risen about 18 percent this year in New York on concern that the nuclear row could cut Iran’s exports of more than 2 million barrels per day and as violence in Nigeria reduced supplies.
Dealers are also watching the week-old truce between Israel and Hizbollah, which the U.N. said on Sunday could easily collapse again into “an abyss of violence and bloodshed” if the U.N. resolution that engendered it was violated further.
The U.N. condemned an Israeli raid a day earlier on Hizbollah guerrillas in Lebanon as a breach of Security Council resolution 1701, which stopped the 34-day war.
The conflict had boosted oil prices on worries it could spread to oil producers in the Middle East, source of almost a third of world supply.
But the ceasefire helped lower prices, which on Friday dipped below $70 for the first time since June.
Easing supply pressure, BP (BP.L) said on Friday that it had boosted output by 70,000 bpd at its Prudhoe Bay oilfield in Alaska in the last several days to about 220,000 bpd, or about half of normal operating levels.
The supply loss from the biggest U.S. oilfield raised fears of an unexpectedly big drop in crude inventories. But data last week showed a decline that was in line with forecasts.
Crude inventories have slipped from the eight-year high reached earlier this year, but remain larger than almost any time since 1999, giving refiners a supply buffer against any unexpected disruptions.
“Global oil fundamentals continue to support our view that, barring a severe disruption, crude supplies are adequate,” said Geoff Pyne at ABN AMRO.