Oil hovers below $62 as traders weigh OPEC vs Iran

SINGAPORE, Mar 8 (Reuters) Oil steadied on Wednesday after a two-day slide as traders weighed the prospects OPEC will keep pumping at full pelt and U.S. crude stocks will rise against the risks posed by Iran's nuclear energy row with the West.

Russia on Tuesday backed away from a proposed compromise with Iran, the world's fourth-largest oil exporter, dimming hopes of a resolution before Tehran is referred to the Security Council by the U.N.'s atomic agency, now meeting in Vienna.

Front-month U.S. crude was down 9 cents at .49 a barrel by 0155 GMT, after a 83-cent fall on Tuesday took losses for the week over SINGAPORE, Mar 8 (Reuters) Oil steadied on Wednesday after a two-day slide as traders weighed the prospects OPEC will keep pumping at full pelt and U.S. crude stocks will rise against the risks posed by Iran's nuclear energy row with the West.

Russia on Tuesday backed away from a proposed compromise with Iran, the world's fourth-largest oil exporter, dimming hopes of a resolution before Tehran is referred to the Security Council by the U.N.'s atomic agency, now meeting in Vienna.

Front-month U.S. crude was down 9 cents at $61.49 a barrel by 0155 GMT, after a 83-cent fall on Tuesday took losses for the week over $2. Technically, the market was well supported at the 200-day moving average, effective at $61.15 a barrel.

Oil is still up $4 a barrel or 7 percent since mid-February on worries over Iran and the supply disruptions in Nigeria.

''OPEC and inventory data should put downward pressure on prices later today,'' said Dariusz Kowalczyk, senior investment strategist at CFC Securities in Hong Kong.

Major OPEC producers have said the cartel will carry on pumping near flat out into the second quarter, a decision set to be approved at a meeting in Vienna, while U.S. weekly data later in the day is expected to show a further rise in crude stocks.

''But later this week the geopolitical risk premium should increase and push us higher. The situation with Iran will continue to weigh heavily on investors' minds,'' said Kowalczyk.

Traders are still waiting for the International Atomic Energy Agency (IAEA) board, meeting in Vienna, to formally refer Iran to be the U.N. Security Council over its nuclear activities.

The U.N.'s nuclear watchdog chief Mohamed ElBaradei said on Monday a deal to defuse the dispute was still possible after diplomacy involving Russia and three European Union powers, helping send oil prices lower.

But Russia on Tuesday backed away from a reported proposal to let Iran do some atomic research if it agreed to refrain from enriching uranium on an industrial scale for 7-9 years.

Oil traders fear any punitive action could prompt Iran to cut supply. However, the International Energy Agency (IEA), the co-ordinator of emergency oil stocks, has said it could safely fill a gap left by a possible Iranian crude embargo.

Another possible flashpoint could come in Ecuador, where state oil firm Petroecuador warned on Tuesday that it could shut down oil production of about 200,000 bpd if a strike that has already cut output by a third is not over by Wednesday.

OPEC, STOCKS Supply risks and outages have partially eclipsed fears about the seasonal drop in second quarter global oil demand and robust inventory levels in the United States, the world's top consumer.

Nigerian militants have forced operators to shut around 450,000 barrels a day (bpd) of production for more than two weeks, although Nigeria's top oil official Edmund Daukoru said 75 percent that output should be restored in around two weeks.

That outage, coupled with $60-plus prices, has cleared the way for OPEC to keep production at near its highest in 25 years.

Kuwait's oil minister said he would propose the cartel maintain steady output, and added that supplies should remain at current levels for the whole of 2006.

The world's top oil exporter, Saudi Arabia, has said a cut would be counterproductive.

Heavy exports, coupled with seasonal refinery maintenance, is likely to have pushed up U.S. crude inventories -- which already stand 9 percent higher than a year ago -- by another 1.6 million barrels, according to a Reuters poll ahead of weekly government data due at 1530 GMT on Wednesday.

However, stocks of distillate fuels are expected to have fallen by 1.6 million barrels, while gasoline is seen down 600,000 barrels.

REUTERS SB PM0944 . Technically, the market was well supported at the 200-day moving average, effective at .15 a barrel.

Oil is still up a barrel or 7 percent since mid-February on worries over Iran and the supply disruptions in Nigeria.

''OPEC and inventory data should put downward pressure on prices later today,'' said Dariusz Kowalczyk, senior investment strategist at CFC Securities in Hong Kong.

Major OPEC producers have said the cartel will carry on pumping near flat out into the second quarter, a decision set to be approved at a meeting in Vienna, while U.S. weekly data later in the day is expected to show a further rise in crude stocks.

''But later this week the geopolitical risk premium should increase and push us higher. The situation with Iran will continue to weigh heavily on investors' minds,'' said Kowalczyk.

Traders are still waiting for the International Atomic Energy Agency (IAEA) board, meeting in Vienna, to formally refer Iran to be the U.N. Security Council over its nuclear activities.

The U.N.'s nuclear watchdog chief Mohamed ElBaradei said on Monday a deal to defuse the dispute was still possible after diplomacy involving Russia and three European Union powers, helping send oil prices lower.

But Russia on Tuesday backed away from a reported proposal to let Iran do some atomic research if it agreed to refrain from enriching uranium on an industrial scale for 7-9 years.

Oil traders fear any punitive action could prompt Iran to cut supply. However, the International Energy Agency (IEA), the co-ordinator of emergency oil stocks, has said it could safely fill a gap left by a possible Iranian crude embargo.

Another possible flashpoint could come in Ecuador, where state oil firm Petroecuador warned on Tuesday that it could shut down oil production of about 200,000 bpd if a strike that has already cut output by a third is not over by Wednesday.

OPEC, STOCKS Supply risks and outages have partially eclipsed fears about the seasonal drop in second quarter global oil demand and robust inventory levels in the United States, the world's top consumer.

Nigerian militants have forced operators to shut around 450,000 barrels a day (bpd) of production for more than two weeks, although Nigeria's top oil official Edmund Daukoru said 75 percent that output should be restored in around two weeks.

That outage, coupled with -plus prices, has cleared the way for OPEC to keep production at near its highest in 25 years.

Kuwait's oil minister said he would propose the cartel maintain steady output, and added that supplies should remain at current levels for the whole of 2006.

The world's top oil exporter, Saudi Arabia, has said a cut would be counterproductive.

Heavy exports, coupled with seasonal refinery maintenance, is likely to have pushed up U.S. crude inventories -- which already stand 9 percent higher than a year ago -- by another 1.6 million barrels, according to a Reuters poll ahead of weekly government data due at 1530 GMT on Wednesday.

However, stocks of distillate fuels are expected to have fallen by 1.6 million barrels, while gasoline is seen down 600,000 barrels.

REUTERS SB PM0944