Oil prices continue to rise in Asian trade

SINGAPORE, Thursday (AFP) - Oil prices continued higher in Asian trade Thursday as Iran's defiant stand over its nuclear program sparked unease, dealers said.

At 11:47 am (0347 GMT), New York's main contract, light sweet crude for delivery in February, was up 50 cents to 64.44 dollars a barrel from its close of 63.94 dollars in the United States Wednesday.

"The reason for the rise is the increase in the geo-political risk premium because of the situation in Iran," said Dariusz Kowalczyk, a senior investment strategist with CFC Seymour in Hong Kong.

The resumption by Iran of nuclear research activities after a two-year suspension prompted warnings from world powers that OPEC's second-biggest oil exporter could be referred to the UN Security Council to face possible sanctions.

Iran on Tuesday broke the UN seals at its Natanz nuclear plant to resume research into uranium enrichment.

The United States and European nations fear Iran's programme could end with development of a nuclear bomb but Iran insists its program is for civilian purposes.

Dealers said the Iranian nuclear crisis could lead to a supply disruption in oil markets.

"Right now the market supply for oil is tight," Kowalczyk said, noting that the potential for supply disruption from Iran would support prices.

The markets would be watching Thursday's meeting in Berlin between the British, French and German foreign ministers to discuss a response to the Iranian crisis, Kowalczyk said.

British Prime Minister Tony Blair said Iran would likely be referred to the UN Security Council for possible sanctions.

"It's a key factor today; if they refer Iran to the UN, the security risk premium will have to rise and oil prices will have to rise as well," Kowalczyk said.

Forecasting that prices will rise to a high of 65 dollars Thursday if Iran is referred to the Security Council, Kowalczyk said: "The chain of events right now is pointing towards escalation to a standoff and this is bullish for prices ... but there is always room for surprises."

Analysts said weekly inventory figures from the United States Department of Energy also helped drive up prices.

"The storage numbers were generally a little bullish (positive) for crude but pretty bearish (negative) for products," AG Edwards analyst Bill O'Grady said.

The Department of Energy said crude inventories fell 2.9 million barrels to total 318.7 million in the week ended January 6. Oil traders had expected a smaller drop of 600,000 barrels.

The DoE said also US distillate stocks, used to make heating oil and diesel fuel, rose 4.9 million barrels to 133.8 million, compared with forecasts for a rise of 2.2 million barrels as recent temperate winter weather curbed US demand for heating oil.