Oil holds around $70 as U.S. benchmark catches up

SINGAPORE, June 29 (Reuters) Oil held steady around $70 for a third session on Friday as the market remained focused on falling U.S.

gasoline inventories and a decline in crude stocks in a key delivery point in the world's largest consumer.

U.S. crude rose 5 cents to $69.62 a barrel by 0252 GMT, after closing at its highest settlement since late August 2006 and breaching the $70 mark during overnight trade in New York.

London Brent crude oil slipped 2 cents to $70.50.

Crude oil stockpiles in Cushing, Oklahoma -- the delivery point for U.S. crude futures -- fell by 1.4 million barrels last week although nationwide stocks rose 1.6 million barrels to a fresh nine-year high.

The price gap between the American and European benchmarks closed under $1 a barrel for the first time since March, said Tobin Gorey, a commodities strategist with Australia's Commonwealth Bank.

U.S. crude has been trading at an atypical discount to Brent since February, weighed down by higher inventories in the Midwest after a spate of refinery outages cut regional demand for the fuel feedstock.

''There's not very much going on in the market right now other than WTI moving back in line with the rest of the crude benchmarks and it should stay there, at around the $70 region going forward,'' he said.

U.S. refineries have resumed normal production levels following their return from maintenance, leading to the inventory draw at Cushing.

''I don't see that pattern changing. The key issue now whether OPEC will raise production for the peak winter demand season. They might if prices stay at above $70 levels,'' Gorey added.

EIA data also showed a year-on-year deficit of distillate stocks, which include heating oil, deepened after supplies fell 2.3 million barrels.

REUTERS PBB DB1117