Oil prices consolidated above $70 today as traders remained cautious on the potential for improved supplies from Iraq and reduced tension over Iran's nuclear programme.
US crude oil had risen 5 cents to $70.40 a barrel after falling 47 cents yesterday. London Brent crude rose 14 cents to $69.19 a barrel.
Prices dipped below $70 yesterday after US aircraft killed al-Qaeda's leader in Iraq, Abu Musab al-Zarqawi, raising some hope for an improvement in security that could help Iraq's wrecked oil industry recover.
But analysts warned against reading too much into the killing of Zarqawi, who masterminded the deaths of hundreds in bombings, saying it would not end threats to an oil sector curtailed by decades of war and sanctions.
Iraq is struggling to pump two million barrels per day, down from about 2.5 million bpd before the US-led invasion in 2003.
A quarter of Nigeria's output has also been cut by militant attacks, while concern remains over Iran's supplies.
Iran began a fresh round of uranium enrichment this week just as world powers offered it incentives to halt nuclear fuel work with the potential to produce atomic bombs, a UN watchdog said.
Iranian President Mahmoud Ahmadinejad said yesterday the Islamic state would "talk about mutual concerns and solving misunderstandings in the international arena."
But the president's remarks came a day after the country's oil minister said Iran could still use its oil exports for leverage in the dispute over its nuclear programme.