* Oil hits record over $140 as Libya studies possible
output cut, weak dollar
* OPEC chief says oil could hit $170 in coming months
* Nigeria workers, Chevron to resume talks to avoid strike
(Updates prices; adds stock market action)
By Matthew Robinson
NEW YORK, June 26 (Reuters) - Oil prices surged nearly 4
percent to a record over $140 a barrel on Thursday after Libya
said it was studying possible options to cut output in response
to potential U.S. actions against producer countries.
U.S. crude <CLc1> settled up $5.09 at $139.64 a barrel,
after hitting an all-time high of $140.39 earlier, eclipsing
the previous record of $139.89 a barrel hit on June 16. London
Brent crude <LCOc1> settled up $5.50 at $139.83 a barrel.
"The crude oil market spiked sharply higher in early
trading after Libyan National Oil Company chief Shokri Ghanem
said that Libya was considering a production cut," said Tim
Evans of Citi Futures Perspective.
Ghanem, Libya's most senior oil official, said he was
studying the possibility of reducing production in response to
a bill before the U.S. Congress that would empower the Justice
Department to sue members of the Organization of Petroleum
Exporting Countries for limiting oil supplies. []
"We are studying all the options," Ghanem told Reuters.
"There are threats from the Congress and they are taking OPEC
to court, extending the jurisdiction of the U.S. outside the
U.S."
Libya pumped about 1.71 million barrels per day (bpd) of
oil in May, according to a Reuters survey, out of total OPEC
output of 32.12 million bpd.
U.S. President George W. Bush has said he would veto the
legislation if it were passed by Congress. The House of
Representatives passed the bill in May, but the Senate has yet
to schedule a vote on the measure.
Oil prices have rallied over the past six years, supported
by surging demand from emerging economies like China.
Rising flows of cash into commodities from investors
seeking to hedge against inflation and the weak dollar have
added to gains this year.
The dollar fell broadly on Thursday after the Federal
Reserve held interest rates steady on Wednesday and dashed
expectations of an imminent rate hike. []
ECONOMIC STRESS
Oil's gains helped push down U.S. stocks on Thursday, with
the Dow falling to its lowest level since September 2006 on
recession worries. []
Rising fuel costs have strained economies and spurred
protests around the globe, prompting OPEC kingpin Saudi Arabia
to pledge to hike output during a meeting between producer and
consumer nations over the weekend.
OPEC President Chakib Khelil said in an interview Thursday
that prices could reach $170 a barrel in the coming months, and
he reiterated the cartel's position that speculation -- not a
supply problem -- was driving oil to new highs.
"I forecast prices probably between $150 and $170 during
this summer. That will perhaps ease towards the end of the
year," Khelil told France 24 television, according to a text of
the interview released by the station.
Oil prices fell on Wednesday after U.S. government data
showed a surprise build in the crude inventories of the world's
top consumer as demand continued to drop.
Nigerian oil workers met with Chevron <CVX.N> management
and the OPEC country's oil minister on Thursday in an effort to
avert an all-out strike that could cut output. []
(Additional reporting by Robert Gibbons, and Gene Ramos in
New York and Ikuko Kao and Jane Merriman in London; Editing by
Christian Wiessner)
