Oil prices held firm around $70 on Monday after shedding 2.4 percent last week, with dealers weighing more positive signals from Iran on its atomic programme.
US light, sweet crude rose 5 cents to $69.93 a barrel on Monday, taking pause after last week's volatile ride. Oil slumped to a more than three-week low of $68.10 last on Wednesday amid a commodity and equity sell-off sparked by inflation concerns, but later recovered in tandem with other markets after a more doveish message from the Federal Reserve.
While US growth worries may continue to giggle oil market speculators, most traders will be focused on Iran as they await its reaction to a package of incentives from global powers meant to end the months-long stand-off over its atomic agenda.
"With the Iran issue hanging around you can't really take too negative view of (the market)," said David Thurtell of the Commonwealth Bank of Australia. "I think oil could drop $6 to $7 if Iran gives up its nuclear processing ambitions and I think it will.
It's just trying to extract some incentives." Iran's Foreign Minister Manouchehr Mottaki on Sunday said a "positive atmosphere" may help bridge the gap with world powers over its nuclear programme, but did not say when Tehran would respond to the Security Council powers plus Germany.
"The positive atmosphere that has been created could create the best opportunity to pave the way to reaching an understanding," Mottaki said on state television. Iranian President Mahmoud Ahmadinejad on Friday said the package was "a step forward" but also said Iran would not be concerned by possible sanctions if it rejected the June 6 offer.
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 now sits in the middle of the $68-$73 range that has contained it since May, pressured by worries about slowing growth and underpinned by real and threatened supply disruptions that pushed prices above $75 a barrel in April.
Refinery upsets may also help keep gasoline prices supported as dealers gauge how record-high rates at the pump have affected holiday plans in the world's biggest consumer, where gasoline use accounts for more than one-tenth of world oil demand.
A gasoline-producing fluidic catalytic cracking unit at Exxon Mobil's 563,000 barrel per day (bpd) Baytown, Texas, refinery the largest US refinery shut down on Friday, according to a regulatory notice on Sunday.
The unit, one of three cat crackers at the refinery, had been going through an overhaul that began in May and was expected to end this week with the unit's return to production. It had two malfunctions, including a shutdown, in April.
Gasoline edged 82 points or 0.4 percent lower to $2.0300 a gallon on Monday.