Oil edges up towards $69 on Iran, Nigeria concerns

SYDNEY, Apr 11 (Reuters) Oil prices inched towards on Tuesday after touching 10-week highs on increased tensions between the U.S.

and Iran over nuclear ambitions and supply disruptions in Nigeria.

U.S. crude was 15 cents up at .89 a barrel after earlier touching .96, in sight of August's .85 record and adding to Monday's 2 percent rally. London Brent rose 11 cents to .86 after touching an all-time record for the contract of .99 a barrel on Monday.

Oil has risen nearly 13 percent this year, prolonging a rally that began at the start of 2002 with oil at as cash-rich investors inspired by geopolitical tensions buy up commodities. Gold reached its highest since December 1980 on Tuesday.

''Concern about Iran never ceases to push prices,'' said Gerard Burg, minerals and energy economist at the National Australia Bank.

''The market is not really factoring in the true impact of military action but the mere mention of it sends prices higher.'' U.S. President George W. Bush said on Monday that force is not necessarily required to thwart Tehran's nuclear ambitions and dismissed reports of plans for military strikes on Iran as ''wild speculation''.

Bush said diplomacy was his focus in the dispute with Iran, in his first comments since weekend reports in the The New Yorker magazine and The Washington Post that the U.S.

administration had stepped up military planning.

Washington fears the world's fourth-biggest oil producer is building atomic weapons, but Tehran insists it only wants nuclear technology for power generation.

European foreign ministers began reviewing their options for possible restrictive measures against Iran on Monday, which could include financial sanctions, with France calling on Iran to bow to international pressure and suspend nuclear activity.

FALLING GASOLINE STOCKS ''Then there's Nigeria, also bubbling along, and no short-term view that things there will resolve themselves,'' said Burg.

Rebels continue to threaten attacks on Nigerian oil output, with about 500,000 barrels shut in since February in the world's eighth-biggest exporter.

Royal Dutch Shell, operator of about 90 percent of the lost Nigerian output, said on Monday it has yet to resume output of its smaller offshore EA field, though assessment of the site before any restart could begin as early as this week.

Analysts say its larger onshore Forcados field and terminal is likely to be shut longer.

With the loss of gasoline-rich Nigerian oil set to encroach on the U.S. summer driving season, traders are nervously eyeing falling fuel supplies hit by high demand and extensive refinery maintenance to comply with cleaner U.S. fuel standards.

Analysts polled by Reuters predict U.S. gasoline inventories fell last week by an average 2.2 million barrels, extending a 14.1 million barrel fall in the previous five weeks to March 31, in U.S.

government data to be released on Wednesday.

''With this week's stock announcement likely to show a fresh decline in gasoline, it adds to market fears caused by the switch to greener fuels,'' said National Australia Bank's Burg.

REUTERS SB RN0838