Oil: Price firms over $70 after two-day selloff

LONDON - Oil firmed to just over $70 a barrel as bargain-hunting investors snapped up barrels after rising US petrol supplies triggered a two-day rout.

US light crude for June delivery CLc1 settled 25 cents higher at $70.19 a barrel, halting a slide that has cut prices by more than 6 per cent since Wednesday. London Brent crude gained 66 cents to $70.95 a barrel.

Prices are more than $5 below record highs touched two weeks ago, but still up nearly 15 per cent since the start of the year.

Investors have scrambled for oil exposure on hopes that strong demand, years of under-investment and mounting political risks will keep the market's three-year rally running strong.

Some analysts said the fall this week -- prompted by an unexpected rise in US petrol inventories -- may be little more than a brief bump on the road to new highs.

"Even if crude oil prices went down a few dollars in reaction to this latest US weekly data, there is still so much more to the bigger picture than one week of data in one country," said First Energy Capital analyst Martin King in a research note.

"We believe that the positive price bias remains in place to possibly make a move to the upper $70s or low $80s per barrel in the next couple of months." On Wednesday, US inventory data showed the first increase in petrol stocks for two months.

The data also showed little change in petrol demand, indications that US citizens may be adjusting their driving habits to ease the pain of soaring fuel costs.

Petrol prices led the market's fall, dropping 8 per cent in two days, before rising 4.60 cents to close at $2.0406 a gallon.

The market also remains on edge over the risk of disruption from fourth-largest oil exporter Iran, locked in an intensifying row with the West over its nuclear ambitions.

At the United Nations, Western powers plus China and Russia held a first round of talks on a draft resolution that demands Tehran suspend nuclear activities. The sponsors have warned they will push for sanctions if Tehran persists.

In Nigeria, a quarter of oil production remains shut in due to militant violence, although a major oil union suspended a planned shutdown of the local unit of Exxon Mobil after agreeing to a deal.

But the start-up of Exxon Mobil's Erha field in late March helped Nigeria boost output by 50,000 barrels per day in April.

The return of the field and improved exports from Iraq contributed to a 140,000-bpd rise in Opec output in April to 29.76 million bpd, the highest monthly output this year by the cartel.

- REUTERS