Oil falls after Iran nuclear move

The oil market shows little sign of cooling down

Oil prices have fallen after markets were encouraged by Iran's initial reaction to international proposals to halt its nuclear programme.

A rise in US fuel stockpiles also helped to ease worries over supplies.

US light crude fell $1.68 to $70.82 a barrel, while London Brent crude fell $1.62 to $69.19 a barrel.

Iran's chief nuclear negotiator said a package of incentives aimed at ending its stand-off with the international community contained "positive steps".

Tension over Iran's nuclear plan and fears over oil supplies in the event of sanctions have kept prices high.

Situation 'tense'

Tehran is studying proposals aimed at resolving the dispute, thought to include the offer of light water reactors and plane technology in return for it ceasing uranium enrichment.

Negotiator Ali Larijani said talks with EU foreign policy chief Javier Solana were constructive although Tehran has refused to end enrichment, saying it is designed purely for civil use.

The dispute is one of a number of factors which has kept the cost of oil above $70 a barrel in recent weeks.

Militia violence in Nigeria's oil-rich southern delta - the scene of a string of kidnappings of foreign oil workers - and uncertainty over the upcoming US hurricane season have also bolstered prices.

Volatility worries

US crude supplies increased by 1.1 million barrels last week, according to the US Energy Information Administration.

Domestic petrol (gasoline) stocks also rose by 1 million barrels, the administration reported.

High oil prices have unsettled global stock markets in recent weeks, with fears about the economic consequences of rising inflation in the US causing fluctuating share prices.

Nigerian oil minister and Opec president Edmund Daukoru said the oil exporters' body was unhappy with prices at their current level, saying it laid "the seeds of further volatility".

Austria, which holds the EU presidency, has called on major oil producers to raise production and refining capacity in order to take the heat out of the market.

Opec members decided last month not to raise production quotas, saying it would send the wrong signal to the markets.