Oil steadies over $73 on healthy US demand outlook

TOKYO, July 3 (Reuters) Oil held above a barrel on Monday, supported by anticipation of strong driving demand despite high pump prices in the United States, the world's largest energy consumer.

London Brent crude shed a cent at .50 a barrel by 0423 GMT, after touching a high of .98 a barrel that followed Friday's 63-cent gain.

U.S. light crude was closed for a holiday. It gained 41 cents to .93 on Friday after an eight-day rally.

Drivers are expected to take to the road in record numbers during the U.S. Independence Day weekend, after the U.S economy grew in the first quarter at the fastest rate in 2-{ years.

''There are high expectations for U.S. gasoline,'' said Keith Sano, manager for Sumitomo Corp.'s commodities business.

''Prices won't move much until the U.S. market opens after the holiday, when we will see an upward momentum.'' Trading on the New York Mercantile Exchange (NYMEX) will resume on Wednesday.

Higher oil prices have not had a negative impact on global growth, Saudi Arabia's oil minister said in a French newspaper on Saturday, saying initiatives by oil producing states would stabilise the market sooner or later.

Ali al-Naimi said recently perceived fears over prices were related to ''negativism, economic protectionism and so-called 'economic patriotism'''.

Continued concerns over supply disruptions from key oil exporters have supported prices this year, with losses of Nigerian crude production adding bullish sentiment to the market.

Royal Dutch Shell, the largest foreign operator in Nigeria, said on Friday it was losing another 18,000 barrels per day (bpd) of oil output in the country because of an attack on a natural gas plant more than three weeks ago, bringing its total output loss in Nigeria to 473,000 bpd.

Iran's row with the West over its nuclear work, which traders fear could cut supplies from the world's fourth-largest oil exporter, has also supported a near 25 percent rally in Brent prices this year.

The United States on Friday spurned Iranian calls for more time to study an offer of incentives to curb its nuclear fuel programme, insisting Tehran must reply by the Group of Eight industrialised nations' deadline on July 5.

Top Pentagon officers have told the Bush Administration that bombing Iranian nuclear facilities would probably fail to destroy that country's nuclear programme, the New Yorker magazine reported on Sunday.

The senior commanders warned that any attack launched if diplomacy failed to end the stand-off over Iran's nuclear ambitions could have ''serious economic, political, and military consequences for the United States,'' the article said, citing unidentified U.S. military officials.

Many traders were betting oil prices to rise, as speculators increased net long contracts in the week ended June 27, data from the U.S. Commodity Futures Trading Commission showed on Friday.

REUTERS CS DS1143