Oil steadies near $70, stemming losses

LONDON, May 19 (Reuters) Oil rebounded from a five-week low to near a barrel on Friday, stemming losses sparked this week by worries over rising inflation and slowing growth in demand for oil.

Prices edged up as traders saw a buying opportunity after a slide in U.S. crude on Thursday to .85, the lowest since April 10, while supply cuts in Nigeria and concern over possible disruption of oil flows from Iran remain a worry.

''It's a bit of a bounce after the liquidation that we've seen,'' said Kevin Norrish of Barclays Capital. ''The medium-term picture still looks pretty bullish to us. The mid-60s is about as low as it will go.'' U.S. crude was trading 45 cents higher at .90 a barrel by 1120 GMT, after gaining 76 cents on Thursday. London Brent was up 51 cents at .18.

Commodities, stocks and bond markets reeled on Wednesday after the United States reported a steep rise in consumer prices last month, driven by a big jump in fuel costs.

But U.S. crude is still within slight of an all-time high of .35 hit on April 21, supported by supply worries and a flow of money from investment funds seeking to beat returns in markets like equities into oil and commodities.

Gold also edged higher on Friday amid analyst predictions buyers that took the metal to recent 26-year highs may soon return. London's FTSE 100 share index nudged 0.1 percent higher.

''All markets are linked at the moment,'' said Tony Machacek, an oil broker of Bache Financial.

''With regards to bullish factors, there's still concerns about what may or may not happen with Iran and Nigeria.'' WORLD TENSION SUPPORTS OIL Supply losses in Nigeria and concern Iran's standoff with the West over its nuclear work could cut exports from the world's fourth-largest exporter have supported oil in 2006.

OPEC's acting secretary-general Mohammed Barkindo said on Friday that oil prices would not fall until anxiety over so-called geopolitical tensions eases.

''Prices will not fall until this anxiety abates,'' he said at the start of an Oslo workshop attended by officials of the Organization of the Petroleum Exporting Countries and the nternational Energy Agency, adviser to industrialised nations.

Iranian President Mahmoud Ahmadinejad on Thursday derided foes of Iran's nuclear work as mentally disturbed, ignoring a fresh plea by U.N. Secretary-General Kofi Annan for all sides in the dispute to calm their rhetoric.

Iran has cut oil exports since April to match lower refinery demand but will restore shipments to more than 2.4 million barrels per day (bpd) in June, a top Iranian oil official said on Thursday.

Tehran insists its nuclear programme is peaceful, but Western countries fear it could be developing atomic bombs.

Nigerian activists have given Royal Dutch Shell promising signals over a possible return to oilfields it was forced to abandon after a series of militant raids three months ago, but Shell has lost 455,000 bpd of output since February.

Despite the loss of Nigerian crude, prized by refiners because it is easy to process into gasoline, stocks of the motor fuel in top consumer the United States have been rising.

Government data on Wednesday showed a 1.3 million-barrel build last week on high imports, the third week of rises.

But in a sign high prices are taking their toll, industry figures showed U.S. demand for crude and petroleum products in April fell by 1.5 percent from a year earlier, with high pump prices cutting gasoline use by 1.9 percent.

REUTERS CS RN1709