Oil falls on oversupply

New York - Oil prices continued a week-long slump on Friday after government reports showed the US continues to sit on a huge petroleum surplus as the driving season comes to a close.

Benchmark crude for November delivery gave up 19 cents to $65.70 a barrel on the New York Mercantile Exchange. In London, Brent crude fell 25 cents to $64.57 on the ICE Futures exchange.

Prices rebounded early on Friday when President Barack Obama and the leaders of France and Britain issued a stern warning to Iran, demanding the country come clean on its nuclear programme.

"Iran is breaking rules that all nations must follows," Obama said at the opening of the G20 economic summit in Pittsburgh.

Iran is Opec's second-largest oil producer after Saudi Arabia, and its southern border lies along the crucial Strait of Hormuz, where supertankers carry crude from the Persian Gulf to the rest of the world.

Any sabre rattling toward Iran tends to boost oil prices. Still, the effect on Friday was relatively mild with oil producers exporting much less because of a drop in world demand.

"There's a lot of countries that would be more than happy to go over their quotas and make up for Iran's production," said Phil Flynn, an analyst with PFGBest.

Oil prices also got a boost from Bernanke, who said he continues to support the expensive Term Asset-Backed Securities Loan Facility. The programme, which gives loans to investors and is meant to spark bank lending, is seen as inflationary and has driven investors to commodities like oil.

-AP