Oil: Price firms above US$70 as Iran ignores deadline

NEW YORK - Oil prices firmed above US$70 on Thursday as Iran ignored a United Nations deadline to scrap its nuclear programme, raising the possibility of sanctions against the world's fourth-largest oil exporter.

The gains were tempered by news that energy giant BP was preparing to boost production from its beleaguered Prudhoe Bay oil field in Alaska within a month, easing worries that problems at the field could cause a crunch.

US crude oil prices rose 23 cents to US$70.26 a barrel while London Brent rose 7 cents to US$70.25.

A confidential report of the Vienna-based International Atomic Energy Agency (IAEA) said Iran had resumed enriching small amounts of uranium in recent days despite a Thursday deadline to stop its nuclear work.

Western countries, including the United States and the European Union, fear Tehran could be trying to make atom bombs, while Iran says its intentions are peaceful.

US President George W. Bush said Iran must face consequences for failing to meet the UN Security Council deadline, but even Washington's close ally Britain has played down the prospect of any quick measures.

"Initially, the diplomatic gridlock looks like it will generate little in the way of concrete actions," First Energy Capital analyst Martin King said in a report.

Iran reiterated it will not give up its right to nuclear power. "The Iranian nation will never abandon its obvious right to peaceful nuclear technology," Iranian state radio quoted President Mahmoud Ahmadinejad as saying.

Tempering oil's rise, BP is aiming to partially restart oil production at the eastern half of the Prudhoe Bay oil field by the end of September, sources familiar with the company's plans told Reuters.

BP had cut production in half at the field, the largest in the United States, in early August after finding severe corrosion in pipelines that caused multiple leaks - a move that helped drive oil prices sharply higher.

Prudhoe Bay normally pumps around 400,000 bpd of oil, or 8 per cent of US domestic supply. A BP Alaska spokesman would not confirm or deny the end of September target date.

"We are still working to complete our plans but ultimately we need the approval of the Department of Transportation before we can restart," said BP Alaska spokesman Daren Beaudo.

Oil prices have eased more than US$8 below the all-time high hit earlier this month as the summer driving season winds down and after Israel and Lebanon's Hizbollah agreed to a truce.

Nigerian oil unions decided on Wednesday to stage a "warning strike" on Sept. 13 lasting two or three days to protest a lack of security in the Niger Delta, a union leader said.

Violence against foreign oil companies has cut the Opec member's output by about a sixth, or around 500,000 bpd.

Warning strikes typically have no impact on oil output.

- REUTERS