Jan. 11 (Bloomberg) -- Crude oil rose, approaching a 3- month high, a day after Iran's decision to resume research on uranium reprocessing raised the specter of sanctions on OPEC's second-biggest oil supplier.

U.K. Prime Minister Tony Blair said Iran's decision is ``very serious indeed'' and likely to lead to its referral to the United Nations Security Council. Prices earlier fell on an Energy Department report showing that U.S. distillate and gasoline stockpiles rose last week.

``The Iranians are going ahead with their nuclear program and saying the heck with what the rest of the world thinks,'' said Kyle Cooper, an analyst with Citigroup Inc. in Houston. ``They didn't say anything about cutting supplies but the market is still nervous.''

Crude oil for February delivery rose 57 cents, or 0.9 percent, to close at $63.94 a barrel on the New York Mercantile Exchange. Oil reached $64.21 a barrel on Jan. 6, the highest closing price since Oct. 17. Oil touched $64.80, the highest intraday price since Oct. 5. Futures are 40 percent higher than a year ago.

Oil in New York is down 9.8 percent from a record $70.85 a barrel on Aug. 30, the day after Hurricane Katrina struck the U.S. Gulf of Mexico coast.

The average cost of oil used by U.S. refiners surged to $35.24 a barrel in 1981 after Iran cut oil exports, according to Energy Department figures, or $75.44 in 2005 dollars.

Berlin Meeting

U.K. Foreign Secretary Jack Straw will meet with his counterparts from France and Germany in Berlin tomorrow to discuss how to react to Iran's decision.

France, Germany and Britain, acting on behalf of the European Union, have been holding talks with Iran to persuade the nation to abandon uranium enrichment and reprocessing needed for weapons, offering closer trade ties in return.

Tomorrow's meeting will decide ``whether there is still leeway for the three EU countries to continue talks with Iran,'' German Foreign Minister Frank-Walter Steinmeier said in an interview today at German President Horst Koehler's New Year's reception in Berlin. ``We are taking the situation very, very seriously.''

Brent crude oil for February delivery rose 25 cents, or 0.4 percent, to close at $62.17 a barrel on the London-based ICE Futures exchange, formerly the International Petroleum Exchange.

Shunning Inventories

``We're shunning the inventory numbers,'' said Daniel Flynn, a broker with Alaron Trading Corp. in Chicago. ``The focus is on the international situation and potential supply problems.''

U.S. crude-oil supplies fell 2.9 million barrels to 318.7 million, according to an Energy Department report. Inventories were 11 percent above the five-year average for the week, the department said.

Supplies of distillate fuels, which include heating oil and diesel, rose to the highest since September last week, as refiners increased output and imports jumped, the report showed. Gasoline stockpiles climbed to the highest since the week ended July 22. Imports of petroleum products surged 25 percent to an average 3.9 million barrels a day.

Distillate supplies rose 4.9 million barrels to 133.8 million last week, the report showed. A 2.13 million barrel increase was expected, according to a Bloomberg survey. Stockpiles in the week ended Jan. 6 were 2.6 percent higher than the five-year average.

Imports Double

Refiners produced 4.2 million barrels of distillate fuel a day last week, the highest since August. Imports more than doubled to an average 623,000 barrels a day, the highest since February 2004.

Gasoline inventories jumped 4.5 million barrels to 208.8 million, the highest since July. Supplies of the motor fuel were forecast to rise 1.7 million barrels, according to the median of responses by 12 analysts.

Heating oil for February delivery fell 1.08 cent, or 0.6 percent, to $1.7271 a gallon in New York, the lowest close since Dec. 29. Heating oil reached a record $2.21 on Sept. 1. Futures are 34 percent higher than a year ago.

Gasoline for February delivery declined 0.4 cent to $1.7331 a gallon in New York. Futures surged to a record $2.92 a gallon on Aug. 31. Prices are 43 percent higher than a year ago.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: January 11, 2006 15:28 EST