Oil prices steadied yesterday at over $72 after a two-day rally as Iran vowed to press ahead with its nuclear programme.
US crude edged 2 cents down at $72.43 a barrel earlier this morning after surging $2.39 in the past two trading days. London Brent crude slipped 8 cents to $73.30 a barrel.
Iran, the world's fourth-largest oil exporter, is due to give its reply today to a package on incentives by world powers that aims to end a nuclear stand-off with the West, but Supreme Leader Ayatollah Ali Khamenei vowed yesterday that Iran would continue its path on nuclear energy.
The United Nations Security Council has demanded that Iran halt its nuclear work by a deadline of August 31st, raising the prospect of punitive action by the UN.
Traders fear that Tehran may use its oil exports of more than two million barrels per day as a weapon to defend itself in the row. Officials have said sanctions will harm the West more than Iran by sending oil prices even higher.
President Bush yesterday urged the international community to act at the United Nations to curb Iran's nuclear ambitions and said there has to be a "consequence" for Tehran's actions.
The Iranian concern has driven US crude back up from a dip below $70 yesterday, which came after a ceasefire between Israel and Lebanon helped push prices down from a record $78.40 in July.
Oil prices remain 19 per cent up this year on the fear of disruption to Iran's exports and reduced Nigerian supplies.
Royal Dutch Shell, Nigeria's largest foreign oil producer, is losing 495,000 barrels of oil equivalent per day of output it operates in Nigeria, mostly due to militant attacks on installations.