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Oil hovers near $74 on Iran, eyes U.S. stocks

Written by: Staff

SINGAPORE, May 2 (Reuters) Oil held steady below a barrel on Tuesday, keeping within sight of their record-highs on concerns over Iranian exports due to its stand-off with the West and forecasts for ebbing U.S. gasoline stocks.

U.S. light, sweet crude gained 5 cents to .75 a barrel by 0350 GMT after soaring .82 on Monday, rallying for a second day toward the .35-record struck on April 24.

''The key factor is Iran. The tension between Iran and the United States has increased a bit more, while Nigeria presents a consistent problem,'' said Gerard Burg, economist at National Australia Bank.

U.N. ambassadors from the United States, Britain and France are expected this week to introduce a Security Council resolution to make Iran comply with demands to halt enrichment, a measure traders fear will raise risk to the world's number-four exporter.

Tehran has vowed not to budge in its pursuit of a nuclear fuel cycle. The West fears it wants to build a nuclear bomb.

Russia and China -- the other two veto-wielding council members -- say they do not favour sanctions at the moment, while Washington has warned it could take action on its own or with allies, if the United Nations moves too slowly.

These concerns prompted Tehran to urge the U.N. to stop the United States threatening the Islamic Republic with a military strike against its nuclear programme.

Saudi Arabia, the world's biggest oil exporter, said prices were too high due to hedge fund speculation, but he did not see energy costs curtailing demand for crude or products.

''These prices are too high and we don't seek them. I don't think demand destruction will be a concern,'' Saudi Oil Minister Ali al-Naimi said on Monday.

Weekly U.S. inventory data due on Wednesday will give another glimpse of demand in the run-up to the summer driving season.

Gasoline inventories were expected to fall by an average of 300,000 barrels to 200.6 million barrels despite a rise in production, marking an unbroken drop in nine weeks. Crude and distillate stocks were expected to ease marginally. S] U.S. gasoline prices at the pump have soared to more than a gallon in some cities, with retailers reporting some delivery shortfalls in the East Coast because of a distribution problem with ethanol, the new additive required beginning this month.

Ethanol replaces the water-polluting MTBE, short for methyl tertiary butyl ether.

Further fuelling uncertainty was ongoing violence in Nigeria, where militant attacks have cut crude production by a quarter.

The Movement for the Emancipation of the Niger Delta, which wants more local control over the southern delta's oil wealth, said it had detonated 30 kg (66 lb) of dynamite in a car bombing close to a refinery in the oil capital of Warri.

Natural gas-rich Bolivia's move to nationalise its industry also lent support to a market fearful that growing obstacles to foreign investment around the world will make it difficult for energy suppliers to keep up with rapid demand growth.


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