Oil rises on thin US gasoline stocks, supply risks

SINGAPORE, June 18 (Reuters) Oil prices edged up on Monday to extend last week's rally as dealers worried about supplies from Nigeria and the Middle East at a time of peak summer gasoline demand in the United States.

London Brent crude for August delivery currently seen as more representative of the global market, rose 23 cents to .70 a barrel by 0153 GMT, after gaining 11 cents on Friday when it hit a 10-month high.

U.S. crude for July steadied at .00 after climbing 5 percent last week, while U.S. gasoline futures continued to rise to lead oil market gains after data last week showed stockpiles of the motor fuel in the United States unexpectedly failed to build.

''This week's inventory data will be key again, unless something surprising comes out of Iran,'' said Sano Keiichi of Sumitomo Corp.

Iran's chief nuclear negotiator and the European Union's foreign policy chief may meet again in the next few days for talks on the disputed atomic programme of the world's fourth largest oil exporter, an issue that has kept prices bubbling this year.

Dealers also weighed the potential of violence in Israel widening to draw in neighbouring Middle East states, which pump a quarter of the world's oil. Israel said on Sunday it cut fuel supplies to the Gaza Strip, as it hopes to isolate Gaza after Hamas seized control of the territory.

U.S. crude reached a record .40 nearly a year ago on fears that fighting between Israel and Lebanese Hizbollah guerrillas could spread to Middle East oil producers.

Supply worries remained in Nigeria, where gunmen overran a 40,000 barrels per day (bpd) oilfield station operated by Italy's Eni on Sunday, the company said. A spokeswoman did not say whether oil production had stopped.

About 600,000 bpd of Nigeria's gasoline-rich crude output is offline because of militant attacks. Dealers are also watching the prospect of an indefinite general strike due to start on Wednesday. A union leader said oil exports will be halted by the strike.

The supply risks come against a backdrop of growing demand.

The International Energy Agency has raised its forecast for world oil demand this year and called on OPEC to pump more, but the producers group says current crude supplies are sufficient.

''With oil kept off the market while Brent crude is priced at , the oil market has hardly shown itself be one in which supply responds to transparent price signals,'' said Lehman Brothers.

Speculators on the New York Mercantile Exchange boosted net long positions in crude oil and gasoline, while paring heating oil net long positions in the week ended June 12, the Commodity Futures Trading Commission said Friday.

Reuters SBA VP0740