Oil rises towards $70; Iran, U.S. data in focus

LONDON, May 23 (Reuters) Oil rose towards $70 on Wednesday as U.S. warships put on a show of force off Iran's coast, coinciding with a United Nations agency report that said the Islamic republic had expanded its nuclear programme.

But forecasts for a rise in U.S. gasoline stocks in data due at 1430 GMT limited gains. Investors are keenly watching the supply situation in the world's top consumer after a series of refinery problems sent pump prices to a record $3.22 a gallon.

London Brent crude, seen as a better indicator of the global market than U.S. oil, was up 33 cents at $69.85 by 1418 GMT recovering part of the previous day's 97 cents fall.

U.S. crude was up 23 cents at $65.74, held back by a 0.8 percent slide in gasoline.

Nine U.S. warships carrying 17,000 personnel entered the Gulf on Wednesday. Navy officials said it was the largest daytime assembly of ships since the 2003 Iraq war.

They added Iran had not been notified of plans to sail the ships, which include two aircraft carriers, through the Strait of Hormuz, a narrow channel in international waters off Iran's coast and a major artery for global oil shipments.

The International Atomic Energy Agency found in a confidential report seen by Reuters that Iran has not only ignored a U.N.

Security Council deadline to stop uranium enrichment activity but expanded it.

''The U.S. Navy is sending two aircraft carriers into the Gulf for training maneuvers, on the day of the IAEA Iranian report,'' said Olivier Jakob, analyst at Petromatrix.

''We are still of the opinion that this is more a symbolic show of force than anything else.'' French President Nicolas Sarkozy was quoted as saying Iran must decide whether it wants to cooperate with the international community or face harsher sanctions.

A weekly snapshot of U.S. oil stocks is due at 1430 GMT.

A Reuters poll of analysts has forecast a 1.4 million barrels rise in gasoline inventories over the week as refiners lifted output ahead of the Memorial Day holiday this weekend, which marks the start of the summer driving season.

''All eyes will, of course, be on gasoline,'' said Mike Wittner of Calyon investment bank.

''For this week, the average stock build over the last four years is 0.9 million barrels, so if the gasoline number comes in as expected, stocks will still be extremely tight at 13 million barrels below the four-year average.'' Nevertheless, there is a perception among investors that tightness in the gasoline market might start to be easing off, Barclays Capital noted in a research note.

Oil hit a nine-month high of $70.83 on Monday, lifted by strong U.S. gasoline and attacks on oil facilities in Nigeria, the world's eight-biggest oil exporter.

Technical analysts at Barclays Capital put initial support for Brent at $69.10 and resistance at $71.

REUTERS PBB GC2020