Oil: Price ranges back over US$70

US crude oil prices neared a record above US$70 a barrel on Monday as Iran's pursuit of its nuclear programme heightened fears the United States might take military action against the oil-producing nation.

US light sweet crude settled up US$1.08 to US$70.40 a barrel, the highest settlement since the contract began trading in 1983, but still below the intraday high of US$70.85 hit last August after Hurricane Katrina battered oil infrastructure along the US Gulf Coast.

London's Brent crude on Monday rose 89 cents to US$71.46 after touching a new record high of US$71.62.

"The continuing rhetoric out of Iran over the weekend helps to keep it supported and poised to go higher," said John Kilduff, senior vice-president, energy risk management group at Fimat USA in New York.

Former Iranian President Akbar Hashemi Rafsanjani said on Monday Iran would continue to pursue its nuclear programme following its announcement last week it had enriched uranium for use in power stations.

"The Islamic Republic of Iran does not intend to stop," he told reporters in Kuwait during a visit to the Gulf state.

The West suspects the nation is trying to build an atomic bomb and talk of a US attack has topped the international news agenda since a report in The New Yorker magazine this month said Washington was considering using tactical nuclear weapons to knock out Iran's subterranean nuclear sites.

Fear of possible disruption of supplies from Iran, the world's fourth-largest oil exporter, has helped drive the price of US crude more than 20 per cent higher since mid-February.

NIGERIA OUTAGE

Another concern is the shut-in of more than 500,000 barrels per day in Opec producer Nigeria following militant unrest.

Royal Dutch Shell said on Monday it had yet to assess its offshore EA field, despite hopes a preparatory assessment would be made last week.

The review would be a step toward resuming production at the 115,000 barrels per day field, considered the easiest to restart of those that have been shut in.

Analysts say the loss of high-quality Nigerian crude will become more and more of an issue as the US driving season, which begins in May, approaches.

"Light sweet crude is particularly sought after by refiners during the spring and summer as it provides a high yield of petrol," said Mike Wittner of investment bank Calyon.

He added the Nigerian shortfall could not be made up for by the world's largest oil exporter Saudi Arabia, whose spare capacity is heavy, sour and more difficult to process.

Ministers from the Organisation of the Petroleum Exporting Countries have said there is nothing more the group can do to calm the markets.

"On production there is nothing we can do. We are already producing at maximum output," Qatar Oil Minister Abdullah al-Attiyah said. "There is no shortage in supply." Opec, which is expected to hold informal talks later this week on the sidelines of the International Energy Forum in Doha, would probably keep oil output steady for the rest of this year if demand holds steady and prices stay high, he added.

A senior Opec delegate also said on Monday the producer group was unlikely to change current production levels "as things stand" and that crude stocks and spare capacity were adequate to cope with unexpected shortages or rising demand.

- REUTERS