WASHINGTON (AFP) - The United States on Tuesday warned China that a decision to move a deep-sea oil rig into disputed waters in the South China Sea was a "provocative" step which it was monitoring closely.

"We're looking carefully into this matter," State Department deputy spokeswoman Jen Psaki told reporters.

"Given the recent history of tensions in the South China Sea, China's decision to operate its oil rig in disputed waters is provocative and unhelpful to the maintenance of peace and stability in the region." Vietnam has labeled China's decision "illegal" and demanded the rig be withdrawn.

The China Maritime Safety Administration issued a unilateral navigational warning on its website saying the rig would be drilling in the South China Sea close to the Paracel Islands - which are controlled by China but claimed by Vietnam.

Ms Psaki said the renewed regional tensions highlighted the "need for claimants to clarify their claims in accordance with international law and reach agreement about what types of activities should be permissible within disputed areas."