Oil rebounded this morning as worries over Iran's nuclear dispute with the West resurfaced.
US light, sweet crude for September delivery rose 49 cents at $70.55 a barrel by early this morning after sliding $1.83 or 2.5 per cent yesterday to its lowest since late June. London Brent was up 37 cents to $71.95 a barrel, after a $1.50 slide.
US Undersecretary of State Nicholas Burns said yesterday he expected the UN Security Council would "take up its responsibilities" and impose sanctions if Tehran did not stop its enrichment programme.
Iran's President Mahmoud Ahmadinejad said earlier that Iran could not abandon its nuclear programme while the United States was developing new atomic bombs every year, it was reported. Traders fear Iran could retaliate to potential sanctions by disrupting oil flows.
Crude prices have still shed more than 7 per cent after falling for six of the previous eight sessions as a ceasefire took hold in the Middle East, and BP shut in only half of its 400,000 barrels per day (bpd) Prudhoe Bay oilfield.
Traders were afraid the supply loss from the biggest oilfield in the US might lead to a large drop in crude inventories in the world's largest oil market, but data on Wednesday showed a decline of 1.6 million barrels, in line with forecasts.
Crude stocks have fallen from the eight-year high reached earlier this year but remain higher than almost any time since 1999, giving refiners a sizeable supply buffer to guard against any unexpected disruptions.