Oil: Prices firm on US holiday, Iran impasse

Oil prices firmed yesterday after a slide under US$70 ($161) as dealers braced for several weeks of inaction on Iran's nuclear dispute with the West.

US light sweet crude traded up 30 cents at US$69.49 a barrel in the afternoon, after falling US$1.07 on Friday. London Brent crude held steady at US$69.15 a barrel.

The US market was trading electronically, but the New York Mercantile Exchange (NYMEX) floor will be shut for the Labor Day holiday today, keeping trade thin.

Oil prices slumped nearly 5 per cent last week as the season's first hurricane fizzled out and US oil inventories rose, but jitters over Iran kept losses in check.

Washington pressed for sanctions that oil traders fear could disrupt supplies from the world's fourth-largest exporter, but the European Union indicated it wanted more talks.

President Mahmoud Ahmadinejad told UN Secretary-General Kofi Annan that Iran wanted to find a negotiated solution to its nuclear dispute but would not freeze uranium enrichment ahead of any talks.

The European Union has agreed to give Iran two weeks to clarify its nuclear stance.

The West fears it wants to build an atomic bomb, but Tehran says it only wants nuclear power.

EU foreign policy chief Javier Solana will meet Iran's chief nuclear negotiator, Ali Larijani, next week to clear ambiguities in Tehran's reply to major powers' offer of broad cooperation if it stops the nuclear work.

"We're thinking the oil market might downgrade the risk further. A break below US$68 would suggest that the downgrade is on," said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia.

Prices also eased as weather risks appeared to recede, with the Colorado State University hurricane research team last week cutting its outlook for this year's Atlantic storm season to five hurricanes, four less than forecast back in May.

Other supply news was broadly positive over the week end, offsetting last week's closure of 50,000 barrels per day (bpd) of Nigerian output, adding to the Opec member's production woes.

In Iraq, the state oil marketer tendered to sell 6 million barrels of crude it had pumped to Turkey through a pipeline that has been mostly paralysed by sabotage for the past three years, and authorities said they had detained the second most senior al Qaeda figure in the country, potentially improving security.

Russian oil production rose 0.9 per cent to a high of 9.759 million bpd in August, largely thanks to the Exxon-led Sakhalin-1 field ramping up output.

OPEC meets next week to chart output policy ahead of the winter, but is unlikely to change production even though that may mean it continues supplying the market more than demand, Iran's Opec governor Hossein Kazempour Ardebili has said.

- REUTERS