* Nigerian output loss, Israel-Iran tensions underpin prices
* Saudi says ready to boost output, raise capacity
* Workers at Chevron's Nigerian operations begin strike
(Recasts, adds strike in Chevron Nigeria, updates prices)
By Santoh Menon
LONDON, June 23 (Reuters) - Oil bounced off lows to stand
above $136 a barrel in choppy trading on Monday, spurred by
tension between Israel and Iran and as Saudi Arabia's promise to
pump more oil failed to win over a sceptical market.
Oil, which rallied more than $2 earlier in the session, had
briefly fell on the back of gains in the U.S. dollar amid rising
expectations a worsening inflation outlook might prompt the
Federal Reserve to raise interest rates. []
U.S. light crude for August delivery <CLc1> rose 75 cents to
$136.11 a barrel by 1439 GMT in choppy trading between $134 and
$137.50 a barrel.
London Brent crude <LCOc1> was 63 cents up at $135.49.
A ceasefire by rebels halting attacks on facilities in the
Niger delta barely tempered the rise after two new attacks over
the past week knocked out another tranche of Nigerian output.
Some 340,000 bpd of Nigerian output was halted by fresh
militant attacks last week, and more threats to production
emerged on Monday as Nigera's senior oil workers union began a
limited strike at Chevron. The strike has yet to affect
production.
"Bellicose rhetoric between Israel and Iran and escalated
militancy in Nigeria reduced what little optimism there was
surrounding the Saudi's meeting in Jeddah over the weekend,"
said John Kilduff, senior vice president at MF Global.
Oil prices hit a record near $140 a barrel last week and
have doubled from a year ago, stoking inflation and triggering
protests worldwide. A meeting of top energy policy makers in
Jeddah at the weekend offered little hope for a quick fix.
Top exporter Saudi Arabia confirmed it will lift production
for a second time to 9.7 million barrels per day (bpd) in July,
its highest in more than 30 years, and pledged on Sunday to pump
even more if the market demanded it. []
It detailed plans to boost capacity to 15 million bpd when
future demand warrants the investment, in a bid to soothe
growing fears that the world is running out of oil, but those
measures failed to allay fears in an anxious market.
"With the immediate benefit of higher Saudi production
seemingly already lost, and with limited visibility on capacity
expansion plans, there seems to be little here to cool prices,"
Citi analysts said in a note.
Analysts said the short-term supply situation was still very
tight, putting tensions between Iran and Israel back in focus.
Iran said it would give a "devastating" response to any
attack on the country, the latest in a war of words centred on
Tehran's nuclear programme.
The New York Times quoted U.S. officials last week as saying
Israel had carried out a large military exercise, in an apparent
rehearsal for a potential bombing of Iran's nuclear facilities.
Energy experts are concerned any conflict in Iran could lead
to a shutdown of the Strait of Hormuz, a narrow waterway
separating Iran from the Arabian Peninsula through which roughly
40 percent of the world's traded oil is shipped.
JEDDAH OVERSHADOWED
Sunday's emergency meeting in Jeddah infused new urgency to
the ongoing dialogue of major producers and consumers,
participants said, but acknowledged a lack of hard measures for
taming oil's rally could leave the market underwhelmed.
"The meeting was a bit disappointing," said a European
diplomat. "The only producer that came up with any concrete
proposals was Saudi Arabia -- all the other producers just made
bland statements about future capacity plans."
OPEC President Chakib Khelil said on Monday oil producers
could not pump more without demand for extra supply, and at the
moment that demand did not exist.
(Additional reporting by Fayen Wong in Pert and Robert
Gibbons in New York; editing by James Jukwey)
