Oil holds above $70; eyes on UN response to Iran

SINGAPORE, Sept 1 (Reuters) Oil prices held steady above a barrel on Friday, as traders anticipated waiting several weeks before the United Nations decides on sanctions against the world's fourth-largest oil exporter Iran.

U.S. oil prices gained 9 cents to .35 a barrel by 0326 GMT, adding to a 23-cent rise on Thursday. London Brent rose 12 cents to .37 a barrel.

Iran failed to dispel doubts that it wants to build nuclear bombs, the U.N.'s nuclear watchdog said on Thursday, clearing the way for the U.N. Security Council to consider sanctions that traders fear could lead Tehran to disrupt oil supplies.

''There were no surprises with Iran's response -- the market is now eyeing the response that will come from the international community,'' said Gerard Burg, minerals and energy economist at National Australia Bank.

U.S. President George W. Bush has called for a strong response, while council diplomats said they would proceed cautiously, delaying deliberations until after a meeting between European Union foreign policy chief Javier Solana and top Iranian nuclear negotiator Ali Larijani.

''We will continue to work closely with our allies to find a diplomatic solution, but there must be consequences for Iran's defiance,'' Bush told a convention of U.S. veterans.

''We must not allow Iran to develop nuclear weapons.'' IRAN PUSHES FORWARD The International Atomic Energy Agency (IAEA) said in a report that Iran had resumed making low-enriched uranium at its pilot enrichment plant, though Iran denies it is trying to build a nuclear bomb.

''Iran has not suspended its enrichment related activities,'' the IAEA said. ''Iran has not addressed the long outstanding verification issues or provided the necessary transparency to remove uncertainties associated with some of its activities.'' The light price gains reversed a slide that saw U.S. crude hit a 10-week low at .65 a barrel on Wednesday, with analysts pointing to pressure from a weaker-than-expected hurricane season in the U.S. Gulf Coast to date and healthy oil stocks in the United States.

''The fundamentals haven't changed -- supplies in the United States are solid, the hurricane season hasn't quite come on with the impact of last year, and the uncertainty over Iran has already been factored into the premium on oil,'' said Burg.

U.S. supplies looked set to rise as oil major BP Plc aimed to restart production at the eastern half of its 400,000 barrels per day (bpd) Prudhoe Bay field in Alaska by the end of September, sources familiar with the plan said on Thursday.

The oilfield represents about 8 percent of U.S. domestic supply, but BP shut half of the field in early August after a leak was discovered, a result of severe pipeline corrosion.

In the world's eighth-biggest exporter Nigeria, a planned strike by oil workers' unions aims to pressure the government into doing more to quell violence in the Niger Delta, a union leader said Thursday, but it is unlikely to cripple operations.

A sixth of its output capacity is already shut down due to a series of militant attacks on oil facilities.

REUTERS MQA BST0922