Oil prices rose toward $72 on Tuesday, as a dispute between Iran and the West over Tehran's nuclear programme rumbled on and OPEC delegates said the cartel would keep pumping at near maximum rates to soothe market fears.

Iranian Minister of Petroleum Sayed Kazem Vaziri Hamaneh arrives at a Hotel in Caracas, Venezuela, May 29, 2006. Venezuela will be the seat of the 141 OPEC meeting to be held in Caracas June 1, 2006. The Energy Ministers of the member countries will discuss output quotas, prices and measures to meet the demand and ensure fair prices. [AP]

U.S. crude for July delivery was trading 38 cents up at $71.75 a barrel by 0053 GMT. London Brent crude traded 32 cents up at $70.91, after both markets were closed on Monday for holidays.

"The gains are a little surprising but people are looking at Iran and waiting for the big OPEC meeting," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

OPEC President Edmund Daukoru told Reuters on Monday the cartel will probably keep output quotas unchanged at its meeting in Caracas on Thursday and keep pumping as much as it can, as it seeks to avoid high prices spurring investment in alternatives.

Despite high production from the cartel, which controls about half of world oil exports, traders are worried that a stand-off between OPEC member Iran and the West could lead to supply disruptions from the world's fourth-biggest exporter.

Iran said on Monday it had no intention of moving all its uranium enrichment work to Russia to allay fears it could use nuclear fuel technology to make atomic bombs.

The U.S. is pushing Europe and Japan to use broad sanctions to financially pressure Iran if diplomacy fails to resolve the nuclear dispute, the Washington Post reported on Monday.

World powers were expected to meet this week in Europe to complete work on a package of incentives and sanctions.

Worries over high prices leading to inflation and slower demand growth have balanced concerns over supply disruptions in recent weeks, taking oil down from a record $75.35 in April. Prices remain 17 percent up this year.

Apparent oil demand in the world's second-largest consumer China climbed 10.8 percent in April from a year earlier, the highest rise since 2004, as a hike in state-set prices encouraged refiners to boost supplies, calculations based on official data showed on Monday.

Car sales in China soared by almost half in the first four months of the year, helping drive a 20 percent rise in demand for gasoline. Fuel price caps have insulated drivers from the full brunt of rising global crude.

U.S. heating oil futures , also used to price diesel, showed strength on Tuesday as traders worry over stricter environmental laws on motor fuels.

Refiners have boosted gasoline yields ahead of peak summer driving demand in the northern hemisphere, leading to rising gasoline inventories in the world's top consumer.