Oil stood above $64 today, amid hopes that the 15 British sailors held by Iran will be released.
Oil steadied above $64 on Wednesday on hopes diplomacy would bring the release of 15 British sailors held by Iran and help ease tensions around the world's fourth-biggest oil exporter.
Prices drew some support from expectations that weekly U.S. data on fuel inventories later on Wednesday will show a slight drop in gasoline stocks in the world's top consumer ahead of peak summer demand.
"Overall, the statistics could be slightly positive," said Olivier Jakob, analyst at Petromatrix in Switzerland. "But on the other hand, the Iranian issue is a bit softer now."
U.S. crude was down 1 cent at $64.63 a barrel by 1022 GMT, after a $1.30 drop on Tuesday. London Brent rose 29 cents to $68.10.
Analysts polled by Reuters forecast a 300,000 barrels fall in gasoline stocks in the week to March 30. Crude oil stocks were expected to have risen 600,000 barrels.
U.S. gasoline inventories become a focus for oil traders during spring and summer. Tightening stocks in recent weeks have supported prices, a trend some analysts expect to last.
"Continued refinery hiccups along with a tight inventory situation is likely to keep gasoline prices well underpinned ahead of the peak summer demand season," said Barclays Capital.
U.S. crude rose $6 to above $68, the highest in over six months, in the days after Iran detained 15 British sailors and marines on March 23.
Investors are keenly aware that Iran exports about 2.5 million bpd of oil and also sits on the Strait of Hormuz, a shipping route for some two-fifths of globally traded oil.
Prices began to slide late on Monday after conciliatory comments by an Iranian official. The move accelerated on Tuesday when British Prime Minister Tony Blair backed diplomacy.
Britain said it had proposed direct bilateral talks with Iran to resolve the row, and that it believed both countries wanted an early resolution.