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Oil dips, steadies near $73 after Iran comments

Written by: Staff

LONDON, June 6 (Reuters) Oil dipped, then steadied below a barrel on Tuesday after Iran said world powers had made positive proposals to end a crisis over its nuclear programme, opening the door to more talks.

Oil swept to a record .35 in April as the dispute between Iran and the United States rumbled on. On Sunday, Iran's Supreme Leader Ayatollah Ali Khamenei said oil flows from the Gulf would be endangered if Washington made a ''wrong move''.

But there was a more conciliatory tone on Tuesday when Iran took delivery of a package of incentives put together by Britain, France and Germany then approved by the United States, China and Russia.

''The proposals had some positive steps in them and someambiguities which should be removed,'' Ali Larijani, secretary of Iran's Supreme National Security Council, said after meeting European Union foreign policy chief Javier Solana.

''We hope, after we study the proposal in detail, we will have another round of talks and negotiations to achieve a balanced and logical conclusion.'' U.S. crude oil dropped 48 cents to .42 a barrel immediately after the news, from .90 just before. By 1024 GMT it had recovered to .75 a barrel, up 15 cents on the previous day.

London Brent was up 2 cents at .39.

Investors and analysts said the oil price would be hostage to Iran headlines for the foreseeable future. The dispute over Iran's nuclear programme has added impetus to a demand-fired rally that has taken oil from in January 2002.

Iran says it wants to enrich uranium for power generation but the United States accuses it of weapons ambitions.

The fact that Iran, a member of the Organization of the Petroleum Exporting Countries, is the world's fourth biggest oil exporter and lies on the Straits of Hormuz, a crucial trade passage, has added urgency to efforts to find a solution.

''You can never take politics out of OPEC's dealings,'' said Anthony Sabino, professor at St. John's University in New York.

''Since the early 1970s, the oil producing nations learned they could use their petroleum exports as a political tool. And since they have little in the way of other bargaining chips, particularly the U.S. and Europe, why would they ever give up that power?'' INFLATION Tugging oil lower was U.S. Federal Reserve chief Ben Bernanke's observation late on Monday that the U.S. central bank needed to remain vigilant on inflation risks even as the economy shifted to a slower pace of growth.

The comment fired speculation that U.S. interest rates have further to rise, stifling oil demand growth in world's biggest consumer by far.

''U.S. bond and stock markets fell after the Bernanke comment -- the main oil market drivers are now hedge funds and pension funds and their key battleground is equity and bond markets, so if they lose money there they like to take profits elsewhere such as on U.S. crude and metals,'' said Naohiro Niimura, vice president of derivatives at Mizuho Corporate Bank in Tokyo.

U.S. government data on Wednesday is expected to show gasoline stocks rose for the sixth week in a row as refineries raise production to meet peak summer demand, a Reuters surve found.

''Assuming higher refinery runs and a sustained high simple yield, gasoline production should rise,'' said JPMorgan in a report. ''We expect gasoline imports will stay robust... demand should be flat to slightly lower from the prior week.'' REUTERS CS BST1631

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