SINGAPORE, Aug 21 (Reuters) - Oil prices rose above $71 a barrel on Monday, bolstered by Iran's determination to continue with its atomic fuel programme ahead of a deadline from the United Nations to halt nuclear work.
U.S. light crude for September delivery
Iran said on Sunday it would not suspend uranium enrichment, ruling out the main demand in a package backed by six world powers. Iran plans to respond formally to by Tuesday.
The United Nations Security Council has demanded that Iran halt its nuclear work by a second deadline of Aug. 31, raising the prospect of punitive action by the U.N.
"Hizbollah's survival appears to have bolstered Iranian confidence, sharpening the chances of a confrontation over nuclear development," said Geoff Pyne at ABN AMRO.
Traders fear the world's fourth-biggest oil exporter might retaliate by withholding exports of more than 2 million barrels per day (bpd).
Dealers are also watching the week-old truce between Israel and Hizbollah, which the U.N. said on Sunday could easily collapse again into "an abyss of violence and bloodshed" if the U.N. resolution that engendered it was violated further.
The U.N. condemned an Israeli raid a day earlier on Hizbollah guerrillas in Lebanon as a breach of Security Council resolution 1701, which stopped the 34-day war.
Traders fear a prolonged conflict could spread to Middle East oil producers, but the ceasefire helped knock over 7 percent off oil prices over the past two weeks. Prices on Friday dipped below $70 for the first time since June.
Relieving supply pressure, BP said on Friday that it had boosted production by 70,000 bpd at its giant Prudhoe Bay oilfield in Alaska over the last several days, to about 220,000 bpd or about half of normal operating levels.
Traders had feared the lost output from the biggest oil field in the United States, due to pipe corrosion and leakage problems, might lead to a big drop in crude stocks in the world's largest oil market, but data last week showed a decline in line with forecasts.
Crude inventories have slipped from the eight-year high reached earlier this year, but remain larger than almost any time since 1999, giving refiners a supply buffer against any unexpected disruptions.
"Global oil fundamentals continue to support our view that barring a severe disruption, crude supplies are adequate," said Pyne.
In OPEC member Nigeria, troops stormed a slum in the southern oil capital of Port Harcourt on Friday, following a government order to use "force for force" against militants who have kidnapped more than a dozen foreign oil workers this month.
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