Oil holds ground as Iran nuclear deadline nigh

By Staff
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SINGAPORE, Aug 22 (Reuters) - Oil prices steadied on Tuesday at over after a two-day rally, as Iran vowed to press ahead with its nuclear programme, raising the prospect of sanctions against the world's fourth-largest oil exporter.

U.S. crude was 1 cent up at .46 a barrel by 0227 GMT, after surging SINGAPORE, Aug 22 (Reuters) - Oil prices steadied on Tuesday at over $72 after a two-day rally, as Iran vowed to press ahead with its nuclear programme, raising the prospect of sanctions against the world's fourth-largest oil exporter.

U.S. crude was 1 cent up at $72.46 a barrel by 0227 GMT, after surging $2.39 in the past two trading days. London Brent crude rose 10 cents to $73.48 a barrel.

Iran is due to give its reply on Tuesday to a package on incentives by world powers that aims to end a nuclear standoff with the West, but Supreme Leader Ayatollah Ali Khamenei vowed on Monday that Iran would continue its path on nuclear energy.

The United Nations Security Council has demanded that Iran halt its nuclear work by a deadline of Aug. 31, raising the prospect of punitive action by the U.N.

''The main risk for the oil market is that we're closer to a time when Iran's oil -- the fourth-largest chunk of global production -- might not be on the market,'' said Tobin Gorey of the Commonwealth Bank of Australia.

Traders fear that Tehran may use its oil exports of more than 2 million barrels per day as a weapon to defend itself in the row. Officials have said sanctions will harm the West more than Iran by sending oil prices even higher.

U.S. President George W. Bush on Monday urged the international community to act at the United Nations to curb Iran's nuclear ambitions and said there has to be a ''consequence'' for Tehran's actions.

Analysts say Iran is calculating any sanctions would start with modest steps, such as travel bans or asset freezes, while Moscow, Beijing and many European Union states may be unwilling to join sanctions that would jeopardise export contracts.

''The (oil) industry is desperately short of foreign exchange for investments -- money which can no longer be borrowed,'' said Fereidun Fesharaki of consultancy FACTS Inc. in an Iran report.

The Iranian concern has driven U.S. crude back up from a dip below $70 on Monday, which came after a ceasefire between Israel and Lebanon helped push prices down from a record $78.40 in July.

Israel gave U.N. environmental experts permission on Monday for an aerial survey of an oil slick that has spread along Lebanon's coast since Israel bombed a power station there five weeks ago.

Oil prices remain 19 percent up this year on the fear of disruption to Iran's exports and reduced Nigerian supplies.

Royal Dutch Shell, Nigeria's largest foreign oil producer, is losing 495,000 barrels of oil equivalent per day of output it operates in Nigeria, mostly due to militant attacks on installations.

A partial outage in BP's Prudhoe Bay oilfield, the largest in the United States, was also expected to lead to a drop in U.S. crude inventories last week, industry analysts said in a Reuters survey Traders are keeping an eye on the fourth tropical depression of the 2006 Atlantic hurricane season, which formed on Monday in the far-eastern Atlantic and was expected to become Tropical Storm Debby, after hurricanes damaged U.S.

production last year.

REUTERS SRS DS1145 .39 in the past two trading days. London Brent crude rose 10 cents to .48 a barrel.

Iran is due to give its reply on Tuesday to a package on incentives by world powers that aims to end a nuclear standoff with the West, but Supreme Leader Ayatollah Ali Khamenei vowed on Monday that Iran would continue its path on nuclear energy.

The United Nations Security Council has demanded that Iran halt its nuclear work by a deadline of Aug. 31, raising the prospect of punitive action by the U.N.

''The main risk for the oil market is that we're closer to a time when Iran's oil -- the fourth-largest chunk of global production -- might not be on the market,'' said Tobin Gorey of the Commonwealth Bank of Australia.

Traders fear that Tehran may use its oil exports of more than 2 million barrels per day as a weapon to defend itself in the row. Officials have said sanctions will harm the West more than Iran by sending oil prices even higher.

U.S. President George W. Bush on Monday urged the international community to act at the United Nations to curb Iran's nuclear ambitions and said there has to be a ''consequence'' for Tehran's actions.

Analysts say Iran is calculating any sanctions would start with modest steps, such as travel bans or asset freezes, while Moscow, Beijing and many European Union states may be unwilling to join sanctions that would jeopardise export contracts.

''The (oil) industry is desperately short of foreign exchange for investments -- money which can no longer be borrowed,'' said Fereidun Fesharaki of consultancy FACTS Inc. in an Iran report.

The Iranian concern has driven U.S. crude back up from a dip below on Monday, which came after a ceasefire between Israel and Lebanon helped push prices down from a record .40 in July.

Israel gave U.N. environmental experts permission on Monday for an aerial survey of an oil slick that has spread along Lebanon's coast since Israel bombed a power station there five weeks ago.

Oil prices remain 19 percent up this year on the fear of disruption to Iran's exports and reduced Nigerian supplies.

Royal Dutch Shell, Nigeria's largest foreign oil producer, is losing 495,000 barrels of oil equivalent per day of output it operates in Nigeria, mostly due to militant attacks on installations.

A partial outage in BP's Prudhoe Bay oilfield, the largest in the United States, was also expected to lead to a drop in U.S. crude inventories last week, industry analysts said in a Reuters survey Traders are keeping an eye on the fourth tropical depression of the 2006 Atlantic hurricane season, which formed on Monday in the far-eastern Atlantic and was expected to become Tropical Storm Debby, after hurricanes damaged U.S.

production last year.

REUTERS SRS DS1145

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