Oil rose on Friday as concerns about crude supplies from Iran lingered despite comments from the Opec nation's president welcoming a proposal to defuse the standoff over Tehran's nuclear work.
Iranian President Mahmoud Ahmadinejad called the proposal by the West a "step forward," but gave no sign when an answer would come. Worries the dispute may cut exports from Iran helped oil hit a record high above $75 in April.
"I think that the fact that we are still hovering in the $70 range tells you the market doesn't think this is fully resolved," said Jason Schenker, economist for Wachovia Bank, "It hasn't priced the Iranian situation out yet."
US light sweet crude rallied late Friday to settle 38 cents higher at $69.88 a barrel after trading as low as $68.80 earlier on news of Ahmadinejad's comments. London's Brent crude gained 43 cents at $68.88 a barrel.
Oil rallied alongside gold and equities after US Federal Reserve Chairman Ben Bernanke toned down his warnings against US inflation, and said oil prices had had a limited impact on the economy.
Federal Reserve Board Governor Donald Kohn said on Friday US inflation expectations had "come a little bit unhinged" in recent months and that the central bank would look for ways to better anchor them.
US crude has largely traded between $68 and $73 since early May, pressured by worries about slowing growth and underpinned by real and threatened supply disruptions.
Ahmadinejad, markedly more upbeat about the proposal on a trip to China than he has been at home, said Iran was examining the offer of incentives for Tehran to stop enriching uranium.
He also warned Iran would not be concerned by possible sanctions if it rejects the June 6 offer.
Oil hit a record $75.35 in April on concern the row over Iran's nuclear work could lead to a cut in Iran's oil exports and as violence shut down a quarter of output in Nigeria.
US Energy Secretary Sam Bodman on Friday called Ahmadinejad's initial positive comments "encouraging."
The West believes Iran's uranium enrichment could be used to make nuclear weapons. Tehran says it is purely for power generation and civilian use.
Oil gained on Wednesday and Thursday, aided by data showing a fall in US crude inventories as refineries ramped up operations to meet peak gasoline demand in summer.
Commodities and oil fell earlier in the week on worries that inflation would lead to higher interest rates, slowing economic growth and energy demand.
Overall, oil prices are up nearly 13 percent up so far this year and stand at their highest, in real terms, since 1980. They have surged from $20 a barrel at the start of 2002.