Oil Prices Seesaw, Close at $137 on Supply Worries
U.S. crude oil futures edged up on Tuesday, seesawing on reports of shut Nigerian output being restored and the threat of a strike shutting other output.
The weak dollar and Middle East tensions, especially Iran and its controversial nuclear program, supported crude. Traders awaited inventory data and a Federal Reserve decision on interest rates, both due Wednesday.
On the New York Mercantile Exchange, August crude rose 26 cents, or 0.19 percent, to settle at $137 per barrel, trading from $135.90 to $138.75.
London Brent crude was marginally higher.
Oil prices rose early on rumors of an attack on Iran's nuclear sites amid rising tensions with Israel over the OPEC nation's nuclear program.
Analysts are worried heightened tensions between Iran and the West could threaten the Straits of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula through which roughly 40 percent of the world's traded oil flows.
Further support came from the weaker dollarand concerns about supplies from Nigeria.
"The dollar weakness gave us a push this morning,'' said Tom Bentz of BNP Paribas Commodity Futures in New York.
"The market is concerned about the missing Nigerian crude supply and obviously the tensions between Iran and Israel.''
Investors have rushed into crude and other commodities this year as a hedge against the falling greenback and inflation, helping to push oil to a record near $140 a barrel last week.
Markets are eyeing the dollar ahead of the U.S. Federal Reserve's interest rate decision on Wednesday, where the Fed is expected to leave rates unchanged.
Nigeria's senior oil workers union began a limited strike at Chevron offices on Monday. The stoppage has not hit production, but has added to concerns about further disruptions OPEC nation, where militant attacks shut 340,000 barrels per day (bpd) of production last week.
United Nations official Ibrahim Gambari will seek a 90-day truce with militants that have attacked oil facilities in the oil-producing Niger Delta.
The disruptions have added to bullish sentiment that has sent prices up 40 percent this year, extending a six year rally in oil as production struggles to keep up with surging demand from emerging economies like China.
Oil cartel OPEC insists supplies are ample and blame the rise on speculators, although top exporter Saudi Arabia announced over the weekend at a meeting between producers and consumers it would hike output in an attempt to cool markets.
Kuwait, one of the few OPEC members with spare capacity, will increase its oil output by 300,000 barrels per day starting mid-2009, state news agency KUNA reported.
Rising fuel costs have hurt the economies of consuming nations and sparked protests around the globe.
The market is also awaiting U.S. weekly oil inventory data due on Wednesday. A Reuters poll of analysts forecast a build in crude, gasoline, and distillate stockpiles.
Video: Speculation will keep feeding market, says analyst.