Oil up to $71 on Iran fears

Aircraft carriers and an 'amphibious assault ship' transit the Gulf of Oman. (US Navy photo)

Oil edged up towards $71 a barrel on Thursday on worries over Iran's nuclear dispute with the West and thin gasoline stockpiles in the United States ahead of peak summer demand.

Benchmark London Brent crude gained 20 cents at $70.80 a barrel by 0616 GMT, after hitting a fresh nine-month high of $70.90 earlier. U.S. crude traded up 14 cents at $65.91.

Prices climbed after nine U.S. warships put on a show of force off Iran's coast on Wednesday, coming at the same time as a United Nations report that said Tehran had expanded its nuclear programme.

"Iran has come back to the forefront and it's definitely having an impact," said an oil broker in Tokyo.

U.S. officials said the navy buildup was the largest daytime assembly of ships since the Iraq war began in 2003, adding Iran had not been notified of plans to sail the ships through the Strait of Hormuz, a major artery for global oil shipments.

Iran is making substantial advances in uranium enrichment in defiance of world demands, U.N. monitors said on Wednesday, opening the way to harsher sanctions against the world's fourth-largest oil exporter over fears it is seeking atom bombs.

The heightened Iran tension added to concerns about summer fuel supplies in the world's top consumer the United States, where gasoline inventories have been rising but remain below average levels ahead of summer demand.

U.S. government data on Wednesday showed gasoline stockpiles increased by 1.5 million barrels last week, exceeding a 1.4 million barrels forecast.

Despite record prices, year-on-year demand surged 1.2% over the past four weeks.

"Two big things are keeping pricing up, the Nigerian and gasoline situation," said Tony Nunan of Mitsubishi Corp. "Inventories are too low for this time of year."

Supplies of gasoline-rich crude from Nigeria, the world's eighth-largest oil exporter, have been cut since February 2006 due to militant attacks on its oil industry.

Chevron Corp. said on Wednesday it had restarted normal production at its Pennington oilfields in Nigeria, after shutting in 15,000 barrels per day (bpd) on May 1, leaving about 695,000 bpd or 23 percent of the country's output shut.

Hopes of oil cartel OPEC raising output to boost oil stocks were dampened after oil ministers from the Organization of the Petroleum Exporting Countries said this week they were satisfied that demand for crude oil was being met.

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