Oil drops under $136 as strike averted

CRISIS AVERTED: Oil prices fell on Thursday after the Nigeria's oil ministry prevented a potentially crippling strike by workers at Chevron. (Getty Images)

Oil fell on Thursday as supply concerns in Nigeria eased after the country's oil ministry prevented a potentially crippling strike by workers at Chevron.

But falling US oil stocks and comments from the White House that Saudi Arabia was unlikely to raise output in the near term supported prices, which have climbed 40 percent this year.

US crude fell 73 cents to $135.95 a barrel by 5:58am GMT, after settling up $2.67 at $136.68 a day ago on the Nigerian worries. London Brent crude slid 66 cents to $135.78.

Nigeria's oil ministry intervened at the eleventh hour on Wednesday to avert a strike at Chevron, saying it had persuaded the firm to reduce its expatriate workforce.

A senior oil workers' union had accused Chevron of having too many foreign staff, and a strike could have slashed output from the world's eighth-biggest oil producer.

But some support came after comments from the White House, which said it was not expecting Saudi Arabia to announce an output hike when producers and consumers meet in the kingdom on June 22 to address soaring oil prices.

"I think people are still in a wait-and-see situation for crude. We are in a ranged market today," said Marc Lansonneur, Societe Generale's head of commodities derivatives in Asia, adding prices were bound within the $132-$140 range.

A surge in speculative buying by investors hedging against inflation and a weak dollar has accelerated oil's rally this year.

News that the world's top oil exporter planned to boost output to bring down prices, had weighed on the market since oil touched a record near $140 a barrel on Monday.

On Wednesday, US President George W. Bush called on the Congress to lift a ban on offshore oil drilling to help ease prices, but analysts said this would bring little quick relief to consumers.

Venezuela reiterated on Thursday that high oil prices are not due to production issues and it would only hike oil output under an OPEC accord.

The oil minister said Venezuela would not attend the Saudi meeting this Sunday, and that there was no need for OPEC to meet before its scheduled September meeting.

In the US, official data showed crude oil stocks fell for a fifth week in a row, lending further support to crude prices.

Stocks of distillates, including heating oil and diesel, rose by 2.6 million barrels, above forecasts for a 1.8-million-barrel rise, while US gasoline stockpiles fell 1.2 million barrels, compared with calls for an 800,000-barrel rise.

Later on Thursday, traders will watch US data on initial jobless benefit claims and leading economic indicators for May, to gauge the economic health of the world's number one oil consumer. (Reuters)

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