Oil rose to almost $72 a barrel today as Iran said it would press on with its nuclear work despite a UN demand to stop enriching uranium.
The row over Iran's nuclear programme has raised concern of disruption to oil flows from the world's fourth-largest exporter. Iran had said it would respond formally by tomorrow to Western incentives to halt enrichment.
US crude was up 76 cents at $71.90 a barrel by mid-morning. London Brent crude rose $1.30 to $73.60.
The United Nations Security Council has demanded that Iran halt its nuclear work by a second deadline of August 31st, raising the prospect of punitive action by the UN.
Traders fear the world's fourth-biggest oil exporter might retaliate by withholding exports of more than two million barrels per day.
Dealers are also watching Israel and Hizbullah's week-old truce, which the UN said yesterday could easily collapse again into violence.
Traders fear a prolonged conflict could spread to Middle East oil producers, but the ceasefire helped knock over 7 per cent off oil prices over the past two weeks. Prices on Friday dipped below $70 for the first time since June.
Relieving supply pressure, BP said on Friday that it had boosted production by 70,000 bpd at its giant Prudhoe Bay oilfield in Alaska over the last several days, to about 220,000 bpd or about half of normal operating levels.
Traders had feared the lost output from the biggest oil field in the United States, due to pipe corrosion and leakage problems, might lead to a big drop in crude stocks in the world's largest oil market, but data last week showed a decline in line with forecasts.