Oil fell this morning 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 per cent this year.
US crude fell 73 cents to $135.95 a barrel by 6.58pm, 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 yesterday 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 22nd 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.
Yesterday, 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 today that high oil prices are not due to production issues and it would only hike oil output under an OPEC accord.