Oil: Price holds near $64 on Iran nuclear row

NEW YORK - Oil prices held near US$64 a barrel as the protracted row over Iran's nuclear program kept markets on edge.

US crude futures settled 2 cents lower at US$63.92 a barrel after trading as low as US$63.25 on profit-taking. US oil hit a session peak of US$65.05 a barrel yesterday, the highest level since early October.

London Brent crude was down 36 cents at US$62.26 a barrel.

Prices have shot up nearly US$7 since late December as geopolitical jitters and speculative buying outweighed rising fuel supplies in the United States, the world's biggest oil consumer.

"Iran is playing a smart game of brinkmanship, they are pushing as far into the edge as they can take this and then pulling back," said Tony Nunan, a manager at Mitsubishi Corp.'s risk management business.

Iran said today it would end voluntary cooperation with the United Nations over its nuclear program, including spot checks of atomic installations, if Tehran was referred to the UN Security Council for possible sanctions.

"The government will be obliged to end all of its voluntary measures if sent to the UN council," Iran's Foreign Minister Manouchehr Mottaki was quoted as saying by the official IRNA news agency.

Blanket UN sanctions such as an oil embargo are deemed highly unlikely. UN Secretary-General Kofi Annan said it was too soon to refer the row to the Council.

US President George W. Bush said he was not going to prejudge what the Security Council would do if Iran is brought before the international body.

"I'm not going to prejudge what the United Nations Security Council should do," Bush said, asked if he expected sanctions to be imposed on Iran.

Bush added the United States is still seeking to resolve the crisis over Iran by diplomatic means. "But I recognize that it's logical that a country which has rejected diplomatic entreaties be sent to the United Nations Security Council."

If Iran uses its oil exports as a retaliatory political weapon and ceases exports of around 2.4 million bpd, the rest of the world's spare capacity would struggle to cover the deficit, especially with mounting tensions in Nigeria.

Royal Dutch Shell resumed output at its 120,000 barrels per day (bpd) Nigerian EA oilfield that had been closed for two days after gunmen kidnapped foreign oil workers. But 100,00 bpd of Nigerian oil is still shut because of a pipeline explosion.

- REUTERS