Oil slipped below $70 a barrel Friday after Nigeria said it would halt a battle with rebels during a 60-day amnesty period for militants and release a suspected rebel leader if he accepted an amnesty offer.

The news reversed early sharp gains in the oil market which followed a statement by Nigerian rebels that they had blown up a wellhead in a Royal Dutch Shell oilfield.

By 9:53 am. EDT (1353 GMT), benchmark August U.S. crude oil was down 40 cents per barrel at $69.83, having hit a high of $71.29, up $1.06. London Brent was down 40 cents at $69.38.

There's a lot of focus on the Nigerian situation, said oil broker Christopher Bellew at Bache Commodities in London. Talk of an amnesty helped bring the market off its earlier gains.

Nigerian security forces said they would observe a 60-day ceasefire in the Niger Delta under a federal amnesty program which four rebel factions said Friday they might be willing to take part in.

President Umaru Yar'Adua Thursday offered a presidential pardon to gunmen in the Niger Delta from August 6 to October 4 to try to end years of unrest which have cost the OPEC member billions of dollars in lost revenue.

ATTACK

The oil market had earlier risen sharply after Nigeria's Movement for the Emancipation of the Niger Delta (MEND) said it attacked the wellhead in the Afremo oilfield late Thursday.

Shell said it was investigating reports of an attack on its Afremo platform B facility, which had already been shut down following an attack on the Trans Escravos pipeline in February.

Afremo was one of the sites MEND also said it had attacked in a triple raid Sunday. It said the field was 14 miles from an export terminal through which crude from Shell's Forcados fields is pumped.

Pipeline bombings, attacks on oil and gas installations and the kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two thirds of its installed oil output capacity of 3 million barrels per day.

The intensity of recent attacks in Nigeria have taken the oil market by surprise and tightened West African oil supplies.

Iranian tension has also supported oil.

About 20 people have died in protests after Iran's June 12 presidential election, the most serious unrest since the 1979 Islamic revolution.

Firmer Asian stocks on the back of Wall Street's rally also lent support, with shares outside Japan <.MIAPJ0000PUS> climbing 1.4 percent and Japan's Nikkei <.N225> up 0.8 percent. <.T>

European shares also rose <.EU>.

(Additional reporting by Jennifer Tan; editing by Sue Thomas)

Crude oil Nigeria