* Oil slides more than $1/bbl on dollar strength
* Second day of losses threatens two-month rally
* Analysts see upside risk from Iran's election row
* G8 wants measures to curb oil price volatility
(Updates prices, adds Nigerian militant claims)
By Chua Baizhen
SINGAPORE, June 15 (Reuters) - Oil fell to $71 on Monday,
extending its retreat from eight-month highs as the dollar
rose, although traders kept a close watch on OPEC member Iran,
where contested election results sparked a weekend of violent
protests.
The dollar rose broadly on Monday, cutting into the
commodity purchasing power of buyers using other currencies and
prompting investors who had flocked to commodities as a hedge
against the greenback's woes to unwind some of their positions.
[]
Even post-election political turmoil in Iran, the world's
fifth-largest oil producer, failed to halt a price correction
that many analysts say is long overdue after oil surged more
than 50 percent since mid-April, in spite of still-swollen
global inventories and only faint signs of improved end-user
demand.
U.S. crude <CLc1> fell $1.14 to $70.90 a barrel by 0635 GMT
while London Brent crude <LCOc1> for July, which expires later
in the day, dipped $1.07 to $69.85.
August Brent <LCOQ9>, which will become the front-month
contract, was down $1.10 at $70.70.
"I would say the dollar is probably the driver... but I
have to say I am surprised that (the Iran situation) didn't
drive the market up," said Clarence Chu, a trader at U.S.-based
Hudson Capital Energy in Singapore.
Supporters of Iran's defeated presidential candidate plan a
rally in Tehran on Monday to protest against the re-election of
Mahmoud Ahmadinejad, which has sparked two days of violent
protests in the capital, but the Interior Ministry has declared
the rally as illegal. []
Former Prime Minister Mirhossein Mousavi has appealed to
the Islamic Republic's top legislative body to annul Friday's
poll result, in which hardliner Ahmadinejad took 63 percent of
the vote.
"The Iranian situation would be bullish. It's another round
of geopolitical risk to consider, if it leads to instability in
Iran," said Tony Nunan, risk manager at Mitsubishi Corp in
Tokyo.
While it was unclear whether the domestic protests and
political uncertainty would have any immediate or medium-term
implications on oil supply, any unrest in the region tends to
heighten oil traders' anxiety, particularly with Iran's
coastline flanking the Strait of Hormuz, a Gulf choke point
through which around 40 percent of the world's seaborne oil
trade passes.
Oil prices, which fell from a peak near $150 a barrel last
July to the low $30s late last year, have been buoyed recently
by hopes of economic and demand recovery.
But some analysts, including the International Energy
Agency, have warned that the recent price rally to the highest
settlement since Oct. 20 last Thursday may not reflect market
balances and may hurt recovery efforts.
French Economy Minister Christine Lagarde said G8 ministers
wanted measures to curb volatility in oil and oil products
markets, which put at risk growing signs that their economies
were heading towards recovery. []
In Nigeria, the main militant group said on Monday it had
sabotaged an oil pumping station in the Niger Delta operated by
Chevron <CVX.N>, the fifth attack claimed against the U.S.
energy company in less than a month. []
(Editing by Jonathan Leff)
