Oil climbed above $72 a barrel Friday after the world's nuclear watchdog confirmed that Iran has flouted demands to stop enriching uranium, renewing worries about threats to oil supply.
The report by the International Atomic Energy Agency (IAEA) also said major oil exporter Iran had done little in a 30-day grace period to answer questions meant to determine whether its nuclear work is solely for civilian purposes, diplomats said.
"For now, I'm not expecting prices to break below $70," said Alexander Kervinio, an analyst at SG CIB Commodities in Paris. "We still have the geopolitical tensions supporting prices."
US crude settled up 91 cents to $71.88 a barrel, having fallen this week from the all-time high of $75.35 first hit a week ago. London's Brent crude was up $1.11 at $72.02.
Prices were also led higher by US gasoline, which was up 2.02 cents at $2.0921 a gallon on news that spot shortages continue to occur in the US East and Texas because of distribution bottlenecks related to a change in fuel specifications.
"There is sporadic tightness in the gasoline market," said Lawrence Eagles, head of the Oil Industry and Markets Division at the International Energy Agency, an adviser to 26 oil consuming countries. But President George W. Bush's offer earlier this week of moves to tackle high prices, including his call to ease stringent federal fuel standards designed to cut harmful additives, may ease the situation, Eagles said.
US crude has fallen this week, pressured by China's decision Thursday to raise interest rates and a US government report a day earlier that showed a smaller-than-expected drop in US gasoline inventories.
Analysts had expected jitters over the UN report on Iran to prompt a price rally. The report was being sent to the Security Council, which could impose sanctions against Iran.
Iran's president Mahmoud Ahmadinejad earlier Friday said his country would ignore calls to halt its nuclear work. The West accuses Iran of seeking nuclear bombs, a claim that Iran denies.
"Those who want to prevent Iranians from obtaining their right should know that we do not give a damn about such resolutions," Ahmadinejad told a rally in north-west Iran, the official IRNA news agency reported.
While Iran has said it does not plan to cut its oil exports, traders fear supply disruptions from the world's fourth-biggest exporter should the dispute worsen.
Besides concern about the risk to supply in Iran and over violence in Nigeria that has cut oil output there by almost a quarter, a lack of idle production capacity and rising global demand are also supporting prices. Most of the world's producers are pumping full tilt, leaving little in reserve to cover supply breaks.
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