Oil: Price up as Iran jitters trump swelling stocks

LONDON - European benchmark oil prices struck a record today as a dispute between the world's leading powers and Opec-member Iran over its nuclear programme trumped rising crude stockpiles in the United States.

London Brent for the new front-month June contract settled 71 cents higher at US$70.57 a barrel. US light crude for May settled up 70 cents at US$69.32 a barrel, about US$1.50 from the US record hit last August.

Attention was focused on Iran, which said yesterday it would not back away from sensitive nuclear work, after announcing this week it had enriched uranium to a level used in nuclear power stations.

"Our answer to those who are angry about Iran obtaining the full nuclear cycle is one phrase. We say: Be angry and die of this anger," President Mahmoud Ahmadinejad said on Wednesday, in comments reported by the official IRNA news agency.

United Nations diplomats said the Security Council was unlikely to take substantive action on Iran before the end of April, when it receives a report from the International Atomic Energy Agency.

The IAEA's leader, Mohamed ElBaradei, said in Tehran today he could not confirm Iran had successfully enriched the uranium. He has called on the Islamic state to suspend enrichment and return to diplomatic negotiations.

The tensions in the world's fourth largest crude exporter added to the fear of fuel shortages as demand surges into the northern summer driving season and worries over a loss of about a quarter of Nigeria's crude production to rebel attacks.

London crude prices, which typically trail the US benchmark, have been trading at a premium because European markets rely more heavily on West Africa and Iran for supply.

Thursday's gains erased a decline in oil prices Wednesday after the US government reported an increase in crude stockpiles in the world's largest energy consumer to the highest level in eight years.

Crude stocks in commercial storage in the United States rose by 3.2 million barrels last week to 346 million barrels, more than twice the rise forecast in a Reuters poll and the highest level since May 1998, US Energy Information Administration data showed.

The EIA also said US petrol inventories fell last week by 3.9 million barrels, a deeper fall than expected, as refineries are upgraded to eliminate polluting additive MTBE in favor of ethanol.

- REUTERS