LONDON (Reuters) -- Oil hovered around $70 a barrel on Friday, steadying after a sharp two-day sell-off, as traders balanced healthy U.S. gasoline supplies against persistent geopolitical risks.

U.S. light crude for June delivery rose 16 cents to $70.10 a barrel by 0950 GMT, halting a two-day slide that cut prices by more than 6 percent. London Brent crude rose 32 cents to $70.61 a barrel.

Prices are almost $5 below their record high touched two weeks ago, but still up more than 15 percent since the start of the year.

Investors have scrambled for oil exposure on hopes that strong demand, years of underinvestment and mounting political risks will keep the market's three-year rally running strong.

With that in the background, some analysts said the latest fall -- set off by an unexpected rise in U.S. gasoline inventories, flat demand for the motor fuel and recovering refinery production -- may be little more than a brief bump on the road to new highs.

"Even if crude oil prices went down a few dollars in reaction to this latest U.S. weekly data, there is still so much more to the bigger picture than one week of data in one country," said First Energy Capital analyst Martin King in a research note. "We believe that the positive price bias remains in place to possibly make a move to the upper $70s or low $80s per barrel in the next couple of months."

Wednesday's inventory data showing the first increase in gasoline stocks for two months, coupled with indications that Americans are adjusting their driving habits to ease the pain of soaring fuel costs, has helped calm concerns about supplies over the summer driving season, which begins in three weeks.

Gasoline prices led the market's fall, dropping 8 percent in two days, but they rose 0.52 percent to $2.0050 a gallon on Friday.

"The short-term supply side looks fine and if there is a calming of the geopolitical risks with Iran or Nigeria, we may see a bit of softness in the price and I think that is a buying opportunity," said Mark Mathias, managing director of Dawnay Day Quantum hedge fund.

The market remained on edge over the risk of disruption from fourth-largest oil exporter Iran, locked in an intensifying row with the West over its nuclear ambitions.

At the United Nations, Western powers plus China and Russia held a first round of talks on a draft resolution that demands Tehran suspend nuclear activities. The sponsors have warned they will push for sanctions if Tehran persists.

In Nigeria, a quarter of oil production remained shut down due to militant violence, although a major oil union on Thursday suspended a planned shutdown of the local unit of Exxon Mobil Corp. after agreeing to a deal.

Energy prices may extend their recovery if they catch the latest wave of fund-led commodity investment, which on Thursday pushed copper up 5 percent to a record high and helped gold touch its latest in a series of 25-year peaks.