Oil Prices Back Over $70

Crude oil prices climbed above $70 a barrel Friday on mixed signals from Iran over a package of incentives offered by the West for it to give up uranium enrichment.

Some traders are concerned that Iran, the world's fourth-largest oil producer, might reduce its oil exports as a result of its showdown with the West over its nuclear program.

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On Thursday, American and European officials in Vienna urged Tehran to freeze enrichment and stop withholding information about its nuclear program. The chief U.S. delegate to the United Nation's nuclear watchdog, the International Atomic Energy Agency, Gregory L. Schulte, warned that if Iran rejected the incentives, it could face "the weight of the Security Council."

Iran's supreme leader Ayatollah Ali Khamenei said his country "will not succumb to these pressures." But, the chief Iranian delegate to the IAEA, Ali Ashgar Soltanieh, said they were prepared to negotiate.

"The market's really waiting for Iran's response," to the U.N.-led incentive package, said David Thurtell, commodity strategist with the Commonwealth Bank of Australia in Sydney. "More conciliatory remarks from both Iran and the U.S. will definitely ease the market."

Light, sweet crude for July delivery rose 54 cents to $70.04 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Asia. August Brent crude on London's ICE Futures exchange rose 45 cents to $68.90 per barrel.

Oil prices were also boosted by natural gas futures, which surged more than 9 percent after the U.S. government reported that natural gas storage grew less than market watchers had anticipated.

Although natural gas supply is at its highest level for this time of year, the threat of hurricane season and unseasonably high temperatures in some parts of the United States are raising expectations for high gas and power demand in the coming months.

Natural gas futures rose a cent to settle at $7.220 per 1,000 cubic feet.

On Thursday, OPEC's secretary general, Sheik Ahmed al-Fahd al-Sabah of Kuwait said the Organization of Petroleum Exporting Countries won't cut its current output ceiling until oil prices stabilize. But analysts fear that this move might not be sufficient to curb price pressures.

"We need to see much better growth in OPEC's supplies, otherwise supply's not going to keep up with world demand," Thurtell said. "The market's vulnerable to supply outages, whether they come from hurricanes or civil strikes."

Oil prices have been volatile in previous weeks amid nervousness about the Gulf of Mexico hurricane season, unease about the Iranian dispute and other geopolitical uncertainties, including the war in Iraq and violence in oil-rich Nigeria.

Militants in Nigeria hindered output Thursday by some 500,000 barrels a day, about 20 percent of the African nation's usual daily production.

In other trading, gasoline futures gained 2 cents to $2.0602 a gallon, while heating oil prices rose a cent to settle at $1.9516 a gallon.

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