Oil: Iran worries counter robust supply

Oil prices steadied below US$70 on Wednesday as dealers weighed tensions over Iran's nuclear programme against robust crude inventories in the United States, the world's largest energy consumer.

US crude for October delivery gained four cents to US$69.75 a barrel while London Brent crude rose 22 cents to US$70.08. Both contracts on Tuesday closed below US$70 for the first time since June.

The United Nations Security Council has told Iran, the world's fourth largest oil producer, to suspend nuclear enrichment by Thursday or face possible sanctions, but Iran has repeatedly said it will not comply.

Fears the face-off could trigger a suspension of Iranian oil supplies have underlied crude's record run in recent months.

Security Council members Russia and China, however, have called for a return to talks and analysts were not expecting immediate action against Iran.

Crude oil prices briefly dipped to a 10-week low earlier on Wednesday of US$68.65 after a report from the US government showing a shock build in stockpiles.

The Energy Information Administration said crude stocks rose by 2.4 million barrels, compared with analyst forecasts of a 1.5 million barrel fall, as imports surged to the second highest level on record.

Petrol stocks also rose unexpectedly by 400,000 barrels and distillate stocks, including heating oil, increased by 1.3 million barrels, in line with expectations.

Comfortable supplies and easing political risks have pulled oil prices down by more than US$9 compared with a record of US$78.65 hit early this month.

"There will be a limit to how low prices can fall this quarter. There are still a lot of geopolitical risks," said Eoin O'Callaghan of BNP Paribas.

"When there are milestones in the (Iranian) dispute, there tends to be a rally."

- REUTERS