LONDON (Reuters) -- Oil prices edged back near $70 a barrel on Wednesday, recovering from a 10-week low, as traders anticipated Iran would fail to meet a looming U.N. deadline to halt its atomic fuel program.

The market was also awaiting U.S. fuel inventory data to be released on Wednesday, although a predicted decline in stock levels was expected to be offset by concern over economic slowdown and faltering oil demand.

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U.S. light crude for October delivery added 18 cents to $69.89 a barrel in electronic trading.

The front-month contract closed below $70 a barrel for the first time since June on Tuesday.

The breach of the key level was viewed as a strong pointer to lower prices, but analysts said a deeper selloff was being prevented by worries political tension could lead to supply disruption.

"There will be a limit to how low prices can fall this quarter. There are still a lot of geopolitical risks," said Eoin O'Callaghan of BNP Paribas.

The United Nations Security Council has told oil producer Iran to suspend nuclear enrichment by Thursday or face possible sanctions, but Iran has repeatedly said it will not comply.

"Peaceful nuclear energy is the right of the Iranian nation... it wants to use it and no one can stop it," Iranian President Mahmoud Ahmadinejad said on Tuesday.

Analysts were not expecting immediate action against Iran.

Russia and China have called for a return to talks, while key allies of Washington, Britain and France, have quashed U.S. predictions of a swift resort to sanctions.

For the next snapshot of the health of oil supplies in the world's biggest energy consumer, traders were awaiting U.S. government data to be released at 10:30 a.m. ET.

Crude oil inventories were expected to have fallen by 1.5 million barrels last week as refineries boosted operating rates, while gasoline stocks were seen dropping by 700,000 barrels, according to a Reuters poll of analysts.

Analysts are decreasingly concerned about gasoline inventories. The U.S. summer driving season is considered to end with next week's Labor Day holiday.

More attention could turn to data on gasoline consumption following figures on Monday that showed U.S. gasoline demand grew in June by less than half the rate previously implied.

The focus on winter fuel supplies. Stocks of distillates, including heating oil, were forecast to have risen by 1.3 million barrels, the poll found.

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