Oil: Prices bounce back as Iran worries linger

NEW YORK - Oil prices rose back over US$65 a barrel on Friday, rebounding from steep losses this week that were triggered by rising US crude stockpiles and Opec's decision to keep pumping full-throttle.

The gains were sparked by lingering worries over possible United Nations sanctions against Iran, the world's fourth largest oil exporter, for its nuclear programme.

"You write off Iran at your peril," said Bruce Evers, an oil analyst at Investec Securities in London.

US light crude rose 69 cents to US$65.37 a barrel, bouncing back from more than US$3 of losses earlier in the week. London Brent crude gained 51 cents to US$63.39, after ending US$2.15 lower on Thursday.

The United Nations' nuclear watchdog put off until Saturday resumption of a meeting to consider reporting Iran to the UN Security Council over fears it might be seeking to make atomic bombs.

Analysts have predicted that a majority of 25 to 30 of the 35-nation board would approve the resolution.

US and European leaders, aware that Russia, China and developing nations are keen to avoid a confrontation with Tehran, said Security Council involvement did not mean an end to diplomacy or that Iran would necessarily face sanctions.

But Iran on Thursday told the IAEA its cooperation with the agency would suffer if the case went to the Security Council.

Adding to geopolitical uncertainty, the United States expelled a senior Venezuelan diplomat on Friday in swift retaliation for Caracas sending home an American military attache, escalating a crisis with the major US oil supplier.

AMPLE WESTERN SUPPLIES

The market had focused earlier in the week on bearish stock data in the US, the world's top energy consumer.

Crude oil stocks climbed 1.9 million barrels last week, adding to a stockpile already more than 10 per cent above last year's levels, a government report showed Wednesday.

As a mild winter in the country's key heating oil region dampened demand, weekly heating oil stocks rose 1.8 million barrels to stand 27 per cent above year-ago levels.

Opec members met at the end of January and decided not to change output limits, already running at about a 25-year high.

In Europe, gas oil and petrol stocks in independent Amsterdam-Rotterdam-Antwerp storage tanks also rose last week.

Stocks of gas oil -- consisting of heating oil and diesel -- gained 40,000 tonnes to 1.99 million tonnes, or almost a third above year-ago levels.

- REUTERS