Osamu Tsukimori and Chikafumi Hodo/Reuters
Tokyo, Jun 24: Oil rose for a third straight session to above $137 a barrel on Tuesday, supported by fears of Nigerian supply disruptions and tensions between Israel and Iran.
Crude for August delivery was up a dollar at $137.74 a barrel by 0733 GMT, after settling up $1.38 on Monday. It had hit a record high of $139.89 on June 16.
August London Brent crude was trading up 97 cents at $136.88 a barrel.
Nigeria's senior oil workers union began a limited strike at Chevron on Monday. While the stoppage has not disrupted production yet, it added to concerns about supplies from the OPEC nation after militant attacks shut 340,000 barrels of daily production last week.
"The market is focusing on the immediate impact of this Nigerian attack that reduced production," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.
Ongoing problems in Nigeria have been one of the supply factors that has helped push U.S. crude up by more than 40 percent this year.
Kuwait, one of the few OPEC members with spare capacity, will increase its oil output by 300,000 barrels per day starting mid-2009, and would spend $55 billion on oil projects in the coming five years, state news agency KUNA reported, citing Oil Minister Mohammad al-Olaim.
Analysts said that the news from Kuwait did not have an impact.
Another support to the market is tension over Iran's nuclear programme, with analysts worried any conflict could shut 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.
FOMC meet in focus
The dollar will remain in focus over the next two days as markets wait for the decision of the Federal Reserve's rate setting body on Wednesday.
The Fed is widely expected to leave interest rates unchanged, which should be bearish on the dollar and supportive to the oil market, analysts said.
On Monday the European Union approved new sanctions on Iran, including an asset freeze on its biggest bank, over its refusal to meet demands to end its nuclear programme.
With top energy policy makers who met in Jeddah at the weekend offering little hope for a quick fix to supply concerns, there was little relief seen for oil prices.
"Saudi pledged to pump more crude, but other producers did not follow, which convinced the market to take fresh positions again," Kageyama said.
OPEC's president weighed in on the side of those saying there is no need to pump more oil, becoming the latest cartel member to blame speculation and the dollar for high prices.
Another key piece of data on Wednesday will be U.S. crude oil inventories, which are likely to have risen for the first time in six weeks last week, as imports rose for the second week in a row, a Reuters preliminary poll showed.
The poll of six analysts showed an average forecast for a 200,000-barrel rise in crude stocks, a 1.4 million-barrel gain in distillates and a 400,000-barrel rise in gasoline inventories last week.