SINGAPORE, March 28 (Reuters) - Oil stood $1 higher at $64 a barrel on Wednesday, with traders still rattled by a rumour -- quickly dismissed by U.S. officials -- that some sort of conflict had broken out between the United States and Iran.
U.S. crude prices jumped to a more than six-month high of $68.09 a barrel in after-hours trade late on Tuesday, but quickly fell back to stand at $63.97 a barrel by 0027 GMT, up $1.04 from Tuesday's close. Oil rose just 2 cents in normal trade a day ago.
In London, Brent crude <LCOc1> was up $1.02 to $65.62 a barrel, extending a six-day rally that has added $5.50.
Oil surged $5 late on Tuesday evening on rumours of an unspecified conflict between Western forces and Iran, the world's fourth-largest oil exporter, which has been under mounting world pressure to abandon its nuclear programme.
U.S. officials knocked down any talk of military action.
"We have no information at this time that indicates any incident taking place," said White House National Security Council spokesman Gordon Johndroe.
"Navy has nothing to substantiate that report right now," a U.S. Navy official said when asked about a market rumour that Iran may have fired on a U.S. vessel in the Gulf. "At this juncture, there is no validity to it."
Dealers are still likely to remain on high alert over regional supplies after two other developments revived an Iran risk premium. So far there has been no disruption to Iran's daily shipments of around 2.2 million barrels per day.
Iran seized 15 British sailors on Friday, a day before the United Nations imposed new sanctions on the world's fourth biggest oil exporter because of its nuclear program.
"The market has been on pins and needles with the Iran situation and as soon as the rumor mill got starting things took off," said Phil Flynn of Alaron Trading.
The wild volatility in oil reverberated in other markets. U.S. stocks futures fell sharply, gold prices firmed, U.S. Treasury debt prices rose and the Swiss franc edged higher.
As nerves settle, oil traders are likely to turn their attention to U.S. inventory data likely to show a seventh straight week of dwindling gasoline stockpiles, stoking summer supply worries already kindled by refinery glitches.
Analysts forecast the data, due later today, would show a 1.8 million barrel gasoline draw for the week ending Mar. 23, along with a 1.6 million barrel rise in crude stocks and a 1.2 million barrel draw in distillates, a Reuters poll showed. [EIA/S]
In addition to U.S. refinery hiccups, a strike by workers at the French Mediterranean oil terminal Fos-Lavera, now in its 14th day, has begun to hit refinery output and also raised concerns Europe's ability to export fuel to the United States.
