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Supply concern holds oil above $133 a barrel

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[May 27, 2008]  VIENNA, Austria (AP) -- Oil held steady above $133 a barrel Tuesday on worries about global petroleum supplies and the outlook for the U.S. dollar.

ChiropracticReports of an attack by militants on an oil pipeline in Nigeria, one of Africa's largest oil exporters, also supposed prices.

Light, sweet crude for July delivery was up 98 cents from Friday at $133.17 a barrel in electronic trade on the New York Mercantile Exchange by noon in Europe.

Nymex floor trading was closed Monday for Memorial Day in the U.S., and electronic trading levels were little changed from the day before during Asian hours. Monday was also a bank holiday in Britain, and trading volumes were lower than usual.

In London, July Brent crude futures were up 36 cents at $132.73 a barrel on the ICE Futures exchange.

Memorial Day holiday officially kicked off the American summer driving season, and analysts are expecting the seasonal demand for diesel and gasoline to provide additional support for prices.

The dollar, which had been slipping over the last week after a modest recovery, showed some renewed vigor in afternoon currency trade in Tokyo, gaining ground against both the yen and euro.

But investors will be watching economic data out of the United States to be released over the next few days for further clues about the health of the world's biggest economy.

Reports are expected this week on U.S. consumer confidence, new home sales, gross domestic product and other key economic data. If the reports show the economy's weak trend is continuing or deepening, that would push the dollar lower, which would in turn boost oil prices.

Oil and other hard commodities are seen as hedges against a weakening greenback and inflation. Also, a weak dollar -- the currency of international trade and a key factor in oil's rally from about $65 a year ago -- makes petroleum products less expensive to Asian and European buyers.

Prices were also supported by Monday's news of the latest in a spate of oil-pipeline bombings in Nigeria. The country's main militant group, the Movement for the Emancipation of the Niger Delta, said the sabotage of a pipeline-switching station marked the anniversary in office of President Umaru Yar'Adua, who took power May 29, 2007, with a promise to calm the oil region.

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The local joint venture of Royal Dutch Shell PLC confirmed there had been a pipeline attack and said "some production" had been shut down to allow crews to contain the crude spilling from the ruptured conduit.

Last week, a series of supply warnings shook markets, and Thursday, a report that the International Energy Agency -- the energy watchdog for the most industrialized nations -- is in the process of lowering its forecast for long-term global oil supply, sent crude futures rocketing to an all-time high of $135.09 a barrel.

Investors are also worried about a growing squeeze on global diesel supplies as demand in China surges has sparked a massive run up in heating oil prices.

Over the weekend, China's top economic planning agency again urged oil and power companies to make sure there are enough supplies for earthquake-hit areas and for the Beijing Olympic Games in August.


OPEC's hands-off attitude to rocketing prices also appears to be playing a factor in the growing premium on crude. In that context, Vienna's JBC Energy Market Report noted that OPEC President Chakib Khelil saw no need for a special meeting before the next regular gathering in September, citing him as reiterating that "that there is no shortage of oil in the market and that supply and demand are balanced, while prices are being supported by speculation, political tensions and a weak dollar."

In other Nymex trading, heating oil futures rose more than 9 cents to $3.9599 a gallon (3.8 liters), reflecting last week's low U.S. stock figures, while gasoline prices rose by more than 3 cents to $3.4275 a gallon. Natural gas futures rose nearly 20 cents to $12.055 per 1,000 cubic feet.

[Associated Press; By GEORGE JAHN]

AP Business Writer Thomas Hogue, contributed to this report from Bangkok, Thailand.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.



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