Oil prices rebounded on Tuesday to $70 a barrel in London on nagging concerns over Nigerian crude production at the start of peak gasoline demand in top consumer, the United States. London Brent crude was up 29 cents at $70.00 a barrel, after hitting $70.05 earlier.
It had tumbled 98 cents on Monday after Nigerian unions suspended a two-day strike that had threatened to halt oil flows. US crude traded 49 cents down at $64.71 a barrel, but did not record any settlement on Monday due to a holiday.
"Yesterday's decline was a knee-jerk reaction to the end of the strike, but prices are going up again now because the overall situation in Nigeria is still unstable, and we still have some supply disruptions," said Tony Nunnery of Mitsubishi Corp.
Output from the world's eighth-biggest oil exporter is down by around a quarter after a campaign of militant attacks against oil installations. The country's president-elect Umbra Yar'Adua takes office on Tuesday after elections that observers say were "not credible", and critics have doubts whether Yar'Adua is up to the job of ruling Nigeria, a mosaic of ethnic and religious communities.
Any further disruption to production of Nigeria's gasoline-rich crude would spark worries over fuel supplies as the peak demand season kicked off in the United States over the three-day Memorial Day holiday.
US gasoline futures were steady ahead of the next snapshot of US oil demand and inventories that will be delayed one day to Thursday due to the holiday. "Since the US driving season officially started over the weekend, the build in gasoline stocks will be a big issue and that's why everyone is waiting for the next stocks report," said Nunnery.
US gasoline stocks have increased in recent weeks thanks to a jump in imports as well as rising fuel production from domestic refineries, but they are still 14.5 million barrels lower than a year ago. Opec producers blame US gasoline supply concerns and international tensions between the West and Iran over its nuclear programme for high prices, and see no reason to change crude output, a senior Opec delegate said on Monday.