Oil Prices Close Near $137 on Nigerian Strike Threat

Oil prices rose Thursday after concerns about a possible strike in Nigeria, Africa's top producer, stirred supply worries.


U.S. crude settled up 36 cents at $136.74 a barrel, following a $5 surge in prices on Wednesday.

London Brent crude gained $1.07 to settle at $136.09 a barrel.

Oil dipped as low as $131.55 earlier on the stronger dollar, before rebounding on news Nigeria's senior oil workers union renewed a strike threat against Chevron, raising supply worries.

A strike would further slash oil output in Nigeria, where a fifth of capacity has been shut in since early 2006, when ethnic militants in the Niger Delta began a violent campaign of sabotage against oil installations.

Oil's earlier losses came as the dollar gained on a government report showing total sales at U.S. retailers rose 1 percent in May, twice as much as expected.

A weak dollar in recent months has pushed investors into commodities as a hedge against inflation.

Oil's earlier losses also came amid news that U.S. regulators were seeking a deal with their counterparts in Britain to impose position limits on U.S. crude contracts traded on the ICE Futures Europe exchange.

The move by the U.S. Commodity Futures Trading Commission and Britain's Financial Services Authority could shake some speculators out of the market, analysts said.

"It is sending the message that the CFTC will be taking action. This is probably the first of many steps they are going to implement," said Rob Kurzatkowski, futures analyst for optionsXpress in Chicago. "It has implications for larger institutional traders —pension funds, hedge funds — that have been in the oil markets."

Crude oil prices have jumped roughly 40 percent this year, hitting an all-time high above $139 last week. Commodities markets have boomed over the past six years as demand from emerging economies tests supply growth.

Oil consuming and producing nations, often at odds over the cause of the spike in prices, will meet in Saudi Arabia on June 22 to seek a solution to rising energy costs, which have sparked riots across the globe.

U.S. officials have blamed the surge in prices on fundamentals, and have called on the Organization of Petroleum Exporting Countries to raise output to help cool down markets.

But OPEC members blame speculators for high prices and insist they can do nothing to lower prices.

"The market fundamentals are not affecting prices. The problem is the economic crisis in the United States, which led to a fall in the dollar's value, and threats against Iran, which increased geopolitical tensions," OPEC President Chakib Khelil said, according to Algerian state news agency APS.

"Supply at present exceeds demand, and there is a surplus of around 500,000 barrels per day," Khelil said, adding that OPEC would hold its scheduled meeting on Sept. 9 to "evaluate the market and take decisions to stabilize it."