'Fetch Out of Sequence'?

Does anyone agree that the following nested loop should not produce a 'fetch-out-of-sequence' error when tables paul2 & paul3 each have 2 rows 'Committed'? Unfortunately this error does occur!  

OPEN cur1;
LOOP <<LOOP1>>

    FETCH cur1 INTO var1;
    EXIT WHEN cur1%NOTFOUND;
    OPEN cur2;
    LOOP <<LOOP2>>

        FETCH cur2 INTO var2;
        EXIT WHEN cur2%NOTFOUND;
        INSERT INTO PAUL VALUES('X');
        ROLLBACK;

    CLOSE cur2;
END LOOP LOOP1;
    CLOSE cur1;
 

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