* Oil rises on Nigerian output loss, Israel-Iran tensions
* Workers at Chevron's Nigerian operations begin strike
* Saudi says ready to boost output, raise capacity
(Updates throughout, changes dateline from LONDON)
By Rebekah Kebede
NEW YORK, June 23 (Reuters) - Oil rose on Monday as
Nigerian supply disruptions and escalating tensions between
Israel and Iran outweighed Saudi Arabia's pledge to raise
output and keep markets well-supplied.
U.S. crude rose $1.56 to $136.92 a barrel by 1809 GMT in
choppy activity, while London Brent crude traded up $1.38 to
$136.24 a barrel.
"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,"
John Kilduff, senior vice president at MF Global, wrote in a
research note.
Nigeria's senior oil workers union began a limited strike
at Chevron on Monday. While the stoppage has not disrupted
production yet, it added to concerns about supplies from the
OPEC nation after militant attacks shut 340,000 barrels of
daily production last week.
European Union approved new sanctions on Iran, including an
asset freeze on its biggest bank, over its refusal to meet
demand to end its nuclear program.
"The No. 1 issue in the market today is the strike in
Nigeria. But traders are also uneasy about the agreement among
European Union states to impose new banking sanctions against
Iran, which comes on the heels of increasing tensions between
Israel and Tehran," said Phil Flynn, an analyst at Alaron
Trading in Chicago.
Concern over tensions between Iran and the West over
Tehran's nuclear program have supported prices over the past
year.
Israel carried out a large military exercise earlier this
month which appeared to be a rehearsal for a potential bombing
of Iran's nuclear facilities, according to a New York Times
story.
Over the weekend, Iran said it would give a "devastating"
response to any attack on the country.
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
A meeting of top energy policy makers in Jeddah at the
weekend offered little hope for a quick fix to supply concerns,
which helped send crude to a record high near $140 a barrel
last week and threatened the economies of consuming nations.
"General disappointment with the outcome of that meeting
seems to be pushing prices higher this morning, as well," MF
Global's Kilduff said.
Top exporter Saudi Arabia said it will boost production 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.
The OPEC kingpin also detailed plans to boost capacity to
15 million bpd when future demand warrants the investment.
"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 Santosh Manon in London, Fayen Wong
in Perth and Gene Ramos and Robert Gibbons in New York; Editing
by Christian Wiessner)
