Oil prices paused at $69 on Wednesday ahead of US fuel inventory data, after jumping 2.3 percent towards record levels this week on uncertain supply from major exporters Iran, Nigeria and Iraq.
US crude was trading flat at $68.98 a barrel by 0240 GMT, after gaining 24 cents on Tuesday to take prices within striking distance of the all-time $70.85 high hit last August after Hurricane Katrina swept through the Gulf of Mexico.
London Brent crude fell 23 cents to $69.14 a barrel, after hitting a record $69.70 on Tuesday.
The forward price of US crude for delivery later this year has already powered well beyond the psychological $70 barrier, as traders see little chance of short-term solutions to political tensions and anticipate growth in already robust fuel demand during the northern hemisphere summer driving season.
"Falling stocks coupled with greater and greater focus on geopolitics is keeping the oil price afloat at these high levels," said Andrew Harrington, resources analyst at ANZ.
"We've moved beyond and above the levels where fundamentals count as much as what happens in Iran or Nigeria," he said.
On Tuesday, Iran proclaimed it had begun uranium enrichment, which it says it will build to industrial-scale for power generation. The United States believes it wants to build a bomb.
"I am officially announcing that Iran has joined the group of those countries which have nuclear technology," Iranian President Mahmoud Ahmadinejad said in a televised address. "This is the result of the Iranian nation's resistance."
US President George W. Bush has dismissed reports of plans for military strikes on the world's fourth-biggest oil exporter as "wild speculation", but traders fear diplomatic efforts may falter and that any potential sanctions could lead Tehran to disrupt oil supplies.
China's envoy to the United Nations urged a diplomatic solution to the stand-off on Tuesday, and said military and economic measures would be counter-productive.
US gasoline supplies are already under pressure as demand edges higher, imports fall and an extensive refinery maintenance programme to comply with cleaner fuel standards hits output.
Analysts polled by Reuters predict US gasoline inventories fell last week by an average 2.4 million barrels, extending a 14.1 million-barrel fall in the previous five weeks to March 31, in US government data to be released later on Wednesday.
Crude stocks are expected to rise for a third consecutive week by an average 1.4 million barrels, the survey found.
Fuel supply has been drained by the loss of Nigerian oil, a high yielder of gasoline, with almost one quarter of the country's output down after militant attacks.
Meanwhile, Iraqi exports are at their lowest level since the start of war in 2003 and a black cloud hangs over Iranian supply thanks to conflict over the Islamic state's nuclear ambitions, pushing oil up 13 percent since the start of the year. Oil is riding a rally that has seen it jump about $50 a barrel since the start of 2002, with investors driving a raft of commodities towards record highs and the global economy and growing demand so far proving resilient to soaring fuel costs.
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