Oil hits $70 as funds flow in, Iran rumbles on

SINGAPORE, Apr 17 (Reuters) Oil leapt to a barrel for the first time in seven and a half months extending strong gains made last week as tension mounted between Iran and the West over Tehran's nuclear ambitions.

''The drama over Iran's face-off with the West, the rise of insurgency in Nigeria and gasoline supply concerns in the US ahead of the driving season are keeping a high floor under oil,'' said Victor Shum at consultancy Purvin&Gertz in Singapore, today.

US May crude oil futures rose 66 cents to .98 a barrel by 0205 GMT, having touched earlier, its highest since Hurricane Katrina battered the U.S. Gulf Coast in late August last year, sending US prices to a .85 record high.

London's Brent crude rose to fresh heights after hitting successive records last week, adding 83 cents to .40 on fears that lost Nigerian production and the threat to Iran's output would hit Europe harder than the United States.

Oil prices have risen more than 20 per cent since mid-February, despite sizeable US crude inventories, as geo-political fears compounded fundamental worries that refiners might struggle to make enough gasoline for the summer driving season.

Iran has expanded its uranium conversion facilities in Isfahan and reinforced its Nantanz enrichment plant, a US think tank said over the weekend.

This comes just days after U.S. magazine The New Yorker reported that the U.S. was exploring the option of using tactical nuclear weapons to knock out Iran's underground sites. Western powers fear Tehran may be covertly planning to build an atomic bomb.

Worries over supply from Iran, which pumps about 5 percent of the world's oil, were compounded by Chad, which demanded that a US-led oil consortium pay it at least 0 million by tomorrow or else it would halt its output of up to 170,000 barrels a day.

Oil Minister Mahamat Nasser Hassan told Reuters in an interview at the weekend that Chad had asked Exxon Mobil Corp N> , Petronas and Chevron to put the funds into a state account, circumventing the World Bank's escrow account that was meant to ensure revenues benefit the poor.

In West African producer Nigeria, there was no indication that output was resuming from Royal Dutch Shell's offshore EA field, which has been shut since February, despite hopes for a preparatory assessment last week.

A quarter of the OPEC member's output is shut in due to militant attacks, which many analysts fear could last up to the next presidential elections in a year's time.

REFINERY WOES A series of refinery outages in Asia and the United States added to worries of summer supplies after the goverment said last week that inventories fell by 3.9 million barrels, much deeper than earlier expected due to heavy refinery maintenance.

A ConocoPhillips refinery in Borger, Texas, reported an equipment malfunction at the weekend, according to regulators, while Japan's Cosmo Oil Co. had to shut down a crude unit at its Chiba plant after a fire.

''Along with the continued hardline talk from Iran, we've had some refinery issues, which is not good at this time of year,'' said a New York-based futures broker.

May gasoline rose 0.56 per cent to SINGAPORE, Apr 17 (Reuters) Oil leapt to $70 a barrel for the first time in seven and a half months extending strong gains made last week as tension mounted between Iran and the West over Tehran's nuclear ambitions.

''The drama over Iran's face-off with the West, the rise of insurgency in Nigeria and gasoline supply concerns in the US ahead of the driving season are keeping a high floor under oil,'' said Victor Shum at consultancy Purvin&Gertz in Singapore, today.

US May crude oil futures rose 66 cents to $69.98 a barrel by 0205 GMT, having touched $70 earlier, its highest since Hurricane Katrina battered the U.S. Gulf Coast in late August last year, sending US prices to a $70.85 record high.

London's Brent crude rose to fresh heights after hitting successive records last week, adding 83 cents to $71.40 on fears that lost Nigerian production and the threat to Iran's output would hit Europe harder than the United States.

Oil prices have risen more than 20 per cent since mid-February, despite sizeable US crude inventories, as geo-political fears compounded fundamental worries that refiners might struggle to make enough gasoline for the summer driving season.

Iran has expanded its uranium conversion facilities in Isfahan and reinforced its Nantanz enrichment plant, a US think tank said over the weekend.

This comes just days after U.S. magazine The New Yorker reported that the U.S. was exploring the option of using tactical nuclear weapons to knock out Iran's underground sites. Western powers fear Tehran may be covertly planning to build an atomic bomb.

Worries over supply from Iran, which pumps about 5 percent of the world's oil, were compounded by Chad, which demanded that a US-led oil consortium pay it at least $100 million by tomorrow or else it would halt its output of up to 170,000 barrels a day.

Oil Minister Mahamat Nasser Hassan told Reuters in an interview at the weekend that Chad had asked Exxon Mobil Corp N> , Petronas and Chevron to put the funds into a state account, circumventing the World Bank's escrow account that was meant to ensure revenues benefit the poor.

In West African producer Nigeria, there was no indication that output was resuming from Royal Dutch Shell's offshore EA field, which has been shut since February, despite hopes for a preparatory assessment last week.

A quarter of the OPEC member's output is shut in due to militant attacks, which many analysts fear could last up to the next presidential elections in a year's time.

REFINERY WOES A series of refinery outages in Asia and the United States added to worries of summer supplies after the goverment said last week that inventories fell by 3.9 million barrels, much deeper than earlier expected due to heavy refinery maintenance.

A ConocoPhillips refinery in Borger, Texas, reported an equipment malfunction at the weekend, according to regulators, while Japan's Cosmo Oil Co. had to shut down a crude unit at its Chiba plant after a fire.

''Along with the continued hardline talk from Iran, we've had some refinery issues, which is not good at this time of year,'' said a New York-based futures broker.

May gasoline rose 0.56 per cent to $2.12 a gallon.

Analysts said that the combination of bullish factors has also drawn a fresh infusion of investor funds, helping push open interest on New York Mercantile Exchange crude oil contracts to a record high above 1 million lots last week.

''The funds are back in the market, showing a strong commitment on long positions for crude,'' said Jim Ritterbusch, president of Ritterbusch and Associates.

REUTERS SRS ND0906 .12 a gallon.

Analysts said that the combination of bullish factors has also drawn a fresh infusion of investor funds, helping push open interest on New York Mercantile Exchange crude oil contracts to a record high above 1 million lots last week.

''The funds are back in the market, showing a strong commitment on long positions for crude,'' said Jim Ritterbusch, president of Ritterbusch and Associates.

REUTERS SRS ND0906