Oil rises above $124 on Nigeria pipeline attack

The main militant group in Nigeria's Delta region said it had attacked two Royal Dutch Shell pipelines. Shell said it halted some production due to the incident but declined to say how much.

‘It's really just a little short-covering rally,’ said Christopher Bellew, broker at Bache Commodities. ‘It looks like the pattern of last week of rallies which are then sold into is going to be repeated.’

US crude rose $1.34 to $124.60 a barrel by 1200 GMT, down from a high of $125.22. London Brent was up $1.42 to $125.94.

The incident in Nigeria followed the kidnapping of eight foreign oil workers last week and two bomb blasts in Istanbul on Sunday. No one has claimed responsibility for the Turkish attacks.

Oil has fallen over $23 from a record high of $147.27 on July 11, pressured by signs that record-high prices and slowing economies are curbing demand. Dealers said prices could still head lower for now.

‘We now seem to be in the situation where every rally is being sold,’ said Glen Ward, joint head of commodities at ODL Securities in London.

‘We feel that the trading community is not just liquidating long positions but also looking to establish shorts.’

Data from the Commodity Futures Trading Commission released on Friday showed that speculative funds were shifting to a net short position -- a bet on falling prices -- for the first time in 17 months.Developments in Iran provided some support. The country has more than 5,000 active centrifuges for enriching uranium, its president said, suggesting a rapid expansion of nuclear work.

President Mahmoud Ahmadinejad's announcement was likely to annoy major powers which have offered Iran a package of economic and other incentives to persuade Teheran to suspend its enrichment activities.