Oil rises above $97 amid Nigerian violence

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Oil surged more than $1 a barrel on Wednesday as renewed violence in oil exporter Nigeria and expectations of further declines in U.S. crude stocks revived worries of tightening supplies.

Suspected militant attacks on Tuesday in Nigeria's oil city Port Harcourt have heightened concern over the potential for further disruptions in shipments from the world's eight largest oil exporter.

U.S. crude gained $1.34 to $97.32 a barrel by 11:23 a.m., while London Brent crude rose $1.85 to $95.70.

"With the military and the militant warlords engaged in a violent tit-for-tat, the risk for oil disruptions in Nigeria remains higher than in the past few months," said Olivier Jakob of Petromatrix.

Frequent attacks by militant groups since February 2006 have driven thousands of foreign oil workers from the oil-rich Niger Delta and cut oil exports by about 20 percent.

Investors were also expecting inventories of crude in top consumer the United States to drain further. Weekly U.S. oil inventory data will be released on Thursday, a day later than usual due to the New Year holiday.

"After last week's report, the market will be quite sensitive to another decline in crude stocks, so another draw this week will definitely put some upward pressure on prices," said David Moore of the Commonwealth Bank of Australia.

Stocks of crude in the United States were expected to have fallen 1.8 million barrels last week, the seventh straight week of decline, as refiners processed more crude, according to a Reuters poll.

Distillate stocks, which include heating oil and diesel, were forecast to have increased by 300,000 barrels after three weeks of decline, the survey showed.

Oil traders will also be particularly sensitive to any signs of further fund investment in commodities at the start of the year as the sector rebounded from a loss in 2006, with the broad Reuters/Jefferies CRB Index up nearly 17 percent in 2007.

Oil rose nearly 58 percent last year, the biggest annual gain this decade, rallying strongly in the fourth quarter to touch a record $99.29 a barrel on November 21 as the dollar fell and U.S. oil inventories sank.

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