Oil edged up towards $62 a barrel, halting a steep sell-off after Iran's release of British military personnel as traders fretted over Iran's nuclear programme and US gasoline supplies.

US crude gained 32 cents to $61.83 a barrel by 0327 GMT, after plunging $2.77 or 4.3 per cent on Monday. London Brent crude was up 40 cents at $66.99, recovering from a $1.65 loss in Monday trade subdued by the Easter holiday.

Brent has moved to a record premium to US crude of more than $5 a barrel, reflecting high supplies of US crude at the key Cushing, Oklahoma supply hub.

Prices consolidated after a four-day slide that reflected easing tension as Iran, the world's fourth-biggest oil exporter, released 15 Britons last week. The two-week detention of the sailors and marines had driven US crude oil prices briefly above $68 a barrel, the highest level since September last year.

"The resolution of the dispute over Iran's seizure of British military personnel has seen the risk premium that had been embodied in the crude oil price wound back," David Moore, commodity Strategist at Commonwealth Bank of Australia said.

"However, the potential for further tension involving Iran remains high."

Iran President Mahmoud Ahmadinejad announced on Monday his country had begun the first stage of what it calls "industrial-scale" uranium enrichment, which the West fears could be used to make nuclear weapons. Iran insists it only wants the fuel for generating electricity so it can export more of its oil and gas.

The US said Iran's latest statements on its nuclear plan were another sign that Tehran was defying the international community's call to give up enrichment activities.

Opec oil ministers said high prices reflected tension between Iran and the West rather than any shortage of oil.

Opec President Mohammed Al Hamli said the market was very well supplied, while Iran's oil minister Kazem Vaziri-Hamaneh pointed to Opec's 1.7 million barrels per day supply cuts, agreed last year, as having balanced the market.

But traders are still closely watching gasoline supplies in the US, the world's top consumer, prior to the peak summer driving season. Stockpiles of the motor fuel have dropped nearly 10 per cent since early February amid refinery outages.

A poll of analysts forecast US government data due on Wednesday will show gasoline stocks fell 1.2 million barrels and crude inventories rose 1.6 million barrels last week, as refinery glitches limited output.