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CNN Netscape News: Oil above $66 after Iran defies U.N. call

By Janet McBride
LONDON (Reuters) – Oil climbed further above $66 on Thursday, toward its $70 record, after Iran rejected a U.N. Security Council demand that it halt uranium enrichment.
“There's got to be a crunch point over Iran,” said Geoff Pyne, an independent oil analyst. “At the end of the day Iran is intent on uranium enrichment and the West won't allow it.”
U.S. crude (CLc1) stood at $66.58 a barrel at 1306 GMT, up 13 cents. London Brent crude (LCOc1) was up 50 cents at $66.05.
The U.N. Security Council unanimously adopted a “presidential statement” late on Wednesday calling on Iran to freeze its uranium enrichment work.
But as the five permanent Security Council members and Germany met in Berlin to discuss their next step on Thursday, Iran's ambassador to the U.N. atomic agency ruled out complying.
Oil prices touched their highest point since February 2.
In real terms oil is at levels unseen for a quarter of a century. Prices have climbed from below $20 in a four-year rally partly driven by fast-growing Chinese demand. Supply disruptions in Nigeria and Iraq have helped to fire this year's gains.
Analysts Goldman Sachs stuck to their forecast that U.S. WTI crude would average $69.50 a barrel over the rest of 2006. They noted world economic growth was on a firm footing.
“Although Goldman Sachs economists expect a slowdown in the U.S. economy in the second half of 2006, the continuing recoveries in Europe and Japan, combined with strong growth in China, should make global growth more balanced, and more sustainable into 2007,” they wrote in a research note.
Oil has held above $60 for more than a month, partly buoyed by rebel attacks in Nigeria that have shut a quarter of oil output in the world's eighth biggest oil exporter.
Some of the lost production struggled back on Thursday when Italy's Agip (ENI.MI) lifted a force majeure on exports from its Brass terminal after repairing a sabotaged pipeline, a shipping agent said.
Attackers blew up the Tebidaba-Brass pipeline on March 17, forcing Agip to shut 75,000 barrels per day oil production and causing a spill. Some 455,000 bpd of Royal Dutch Shell (RDSa.L) production remains closed, however.
With so many question marks over supplies, the market is extremely sensitive to demand data. The United States, which uses over 40 percent of the world's gasoline, reported a sharp 5.4 million-barrel drop in weekly stocks on Wednesday.
“We continue to believe gasoline stocks will tighten further in coming weeks,” said Citigroup analysts in a note.
Analysts at BNP Paribas agreed.
“The gasoline market will still be tight over the summer. Last year refineries had to run at high rates of capacity utilisation to meet demand and a similar outcome is likely this year. This should provide support for the WTI price right through the year,” they said.
(additional reporting by Neil Chatterjee in Singapore)

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