BEIJING, April 13 (Xinhuanet)-- Oil prices retreated on Wednesday after report of U.S. crude stockpiles in the highest level since 1998, but analysts suggest the oil market has plenty of strength left in it and prices may hit 80 or 90 do llars a barrel.

    The most bullish traders and analysts said crude could surge even further if Middle East situation deteriorates rapidly.

    Bill O'Grady, a market analyst at AG Edwards, said the recent run up in oil prices was "strikingly similar" to what happened in the late 1970's.

    The price spikes are being "fueled by fears about Iran," O'Grady said.

    Tuesday, Iran's Atomic Energy Organization confirmed that Iran had enriched uranium to a level used in nuclear power plants. Iranian President declared afterwards his country entered the world's "nuclear club."

    U.S. President George W. Bush has dismissed reports of plans for military strikes on the world's fourth-biggest oil exporter as "wild speculation."

    China's envoy to the United Nations urged a diplomatic solution to the standoff on Tuesday, and said military and economic measures would be counter-productive.

    According to the Energy Department's report, U.S. crude stocks rose 3.2 million barrels to 346 million barrels, the highest since 1998, which deepened supply worries that were already heightened by political turmoil in Iran.

    "As long as we have this face-off with Iran, it doesn't matter much how much crude supply we have in the tank," said Bill Perer, president of investment firm W.H. Reeves and Co. in U.S. "The unstated threat of nukes in the Middle East trumps high inventories."

    Gasoline futures also rose Wednesday after the report of U.S. crude stockpiles.

    On London's ICE Futures exchange, the Brent crude contract for May, which expired at the close of trading Wednesday, rose 5 cents to settle at 69.42 dollars. June Brent crude, which will begin trading as the front-month contract on Thursday, rose 12 cents to settle at 69.86  dollars.

    That is absolutely helping to push crude prices up.

    The international Energy Agency said in its monthly oil market report Wednesday that the energy watchdog trimmed its estimate for growth in world oil demand this year to 1.47 million barrels a day, while noting that total demand would likely climb to 85.1 million barrels a day.

    U.S. averages 9.1 million barrels a day over the past four weeks, or 1.2 percent above a year ago, according to CNN News.

    "Consumers are unrelenting in their demand for oil in the United States," said Fimat USA analyst John Kiduff, adding "we have yet to see the breaking point where high prices at the pump impede demand."

    The China General Administration of Customs said China's crude imports in the first three months of 2006 were 37.13 million tons. The number for March was 12.73 million tons.

    The 25.3 percent rise compared with January-March 2005 showed a renewed spike in oil demand from China.

    Analysts predicted the market will rally even further as high oil prices have failed to reduce global demand and it is hard to say how high prices must go.  Enditem

(Agencies)