Oil prices inched towards $66 yesterday as global supply disruptions, both real and anticipated, stoked crude's rally and signalled increased volatility.

US light crude was 15 cents higher at $65.80 a barrel and London Brent crude rose 10 cents to $64.60 a barrel.

A string of supply outages has overshadowed comfortable crude stock levels in the US, the world's largest oil consumer, and pushed prices back towards an all-time high of $ 67.10 hit earlier this month.

"Overall, energy prices remain extremely sensitive to any sort of supply disruption," said a report from Refco.

"We expect crude to trade a volatile range in the mid-$60s until more demand data become available."

Dealers were also reminded that Iran, the world's fourth largest oil producer, could yet be a flashpoint after talks broke down between Europe and Tehran over its nuclear programme.

Last week's supply disruptions are meanwhile clearing up, but oil traders remain on the lookout for further trouble.

Production in Ecuador was recovering but remained around twothirds of its 530,000 barrels per day (bpd) level late on Monday, as the government and oil companies came close to a deal with protesters who crippled output.

Protesters in Nigeria ended a siege of oil facilities on Monday, paving the way for talks with Royal Dutch Shell on compensation for a 2003 oil spill and fire.

Such protests underlined fears over global supply security and refining constraints that have helped keep US oil at an average of $53.79 this year versus $41.47 in 2004.

With some crude production in the UK North Sea and India also offline, dealers worry that Opec will strain to make up any unexpected outages.

Nigeria yesterday said their first deep water offshore field will begin production next month.