Oil Rises Over $135 on Nigeria Strike Threat

Oil traders initially gave a muted response to news that Saudi Arabia was poised to pump oil at its fastest rate in decades next month.

Oil rose $1 to over $135 a barrel on Wednesday after a Nigerian union said it would consider strike action in a dispute with the management of the local unit of Chevron.

U.S. crude was up $1.04 at $135.05 at 1227 GMT, after falling nearly $3 in the past three sessions. The contract briefly hit a record of nearly $140 on Monday.

London Brent crude was 93 cents higher at $134.65.

Nigeria's senior oil workers union said it would consider going on strike if talks with Chevron in a dispute over the transfer of the company's expatriate managing director fail by the end of Wednesday.

Before the news from Nigeria, the market had been steady as traders waited for data that is expected to show a fall U.S. crude stocks ahead of an emergency meeting on Sunday in Saudi Arabia aimed at taming prices.

Oil traders said the market was waiting to see the impact of news that Saudi Arabia was poised to pump oil at its fastest rate in decades next month.

"People are wondering whether the extra Saudi oil will pop the price bubble," said Christopher Bellew of Bache Financial.

U.S. crude oil stock data due later in the day is expected to post a fall of 1.5 million barrels last week, a fifth consecutive draw, a Reuters survey showed.

Analysts are expecting a rise of 800,000 barrels for gasoline and 1.8 million barrels for distillates.

While many analysts questioned whether the Saudis would find willing buyers for its oil at current prices, India's Reliance Industries said on Tuesday it had agreed to buy 30 percent of the additional Saudi crude in July, after lifting the same proportion of extra supplies this month.

The relentless rise in oil, which has pushed prices nearly 40 percent higher since January this year, has led to protests across the world and has alarmed governments worried about its impact on their economies.

Oil prices are up nearly sevenfold since 2002 on strong demand from emerging economies such as China. A surge in speculative buying by investors hedging against inflation and the weak dollar has accelerated the rally this year.

While Saudi moves to dampen markets by pumping more oil, U.S. and British regulators unveiled a plan to slap position limits on U.S. crude contracts on the London-based ICE exchange to rein in speculators.

The combined effort among Saudi Arabia, the United States and Britain could rattle some investors and bring down prices, analysts said.