NEW YORK - Oil prices rebounded from a steep early loss to end modestly higher Thursday in another volatile session fueled by a rising dollar and concerns about supplies. Gas prices reached new record at the pump, rising to a national average of $4.06 a gallon, and are likely to keep rising.
Light, sweet crude for July delivery rose 36 cents to settle at $136.74 a barrel on the New York Mercantile Exchange.
Prices recovered from an earlier dip as low as $131.55 on reports that Nigeria's state-owned oil company will take over oil operations in parts of the country from a Royal Dutch Shell PLC joint venture, a move traders believe could cut output. Analysts said word of a possible strike by Nigerian oil workers contributed to oil's $5 rally from the day's lows, as did psychological factors: When prices failed to drop all the way to $131, many investors took that as a sign to buy.
Some analysts said gasoline futures appeared to lead the rally; rumors of refinery outages may have contributed to gas' gains. July gasoline futures rose 6.02 cents to settle at $3.526 a gallon.
Given the volatile price moves of recent days, analysts saw few signs of a changing trend in Thursday's trading. Prices have gone through several sharp swings over the past week, rising more than $16 last Thursday and Friday, falling more than $7 earlier this week, and jumping back more than $5 on Wednesday.
Analysts say oil is range trading, waiting for direction from a significant move in the dollar or change in supply and demand fundamentals.
Many analysts believe the market's overall sentiment remains bullish, and that new records are a real possibility in coming days. Oil reached its latest trading record of $139.12 last Friday.
'The price movement of crude has been ... dictated by what we've seen in the greenback,' said Edward Meir, an analyst at an analyst at MF Global UK Ltd., in a research note.
On Thursday, the dollar gained ground after the Commerce Department said retail sales rose in May by the biggest amount in six months as 57 million tax rebate checks reached consumers. The 15-nation euro fell to $1.5423 from $1.5571 late Wednesday.
The dollar's strength pushed oil futures to their early lows. Investors who bought commodities such as oil to protect against inflation when the dollar was falling tend to sell when the greenback gains ground. Also, a stronger dollar makes oil more expensive to investors overseas.
The dollar's protracted decline has been a major factor behind the doubling of oil prices over the past year.