Oil climbs as Saudi pledge fails to halt rally

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A vow by Nigerian militants to halt attacks on oil facilities in the delta barely tempered the rise after two fresh attacks over the past week knocked out another tranche of output.

U.S. light crude for August delivery extended early gains to rise $1.14 or 0.84 percent to $136.50 a barrel by 0508 GMT, reversing an early decline of more than $1. London Brent crude rose $1.29 or 0.96 percent to $136.15.

"The market took the opportunity to take profits earlier on Saudi Arabia's promise... but realistically that alone is not enough to calm the market," said Mark Pervan, senior commodities analyst at Australia and New Zealand (ANZ) Bank in Melbourne.

Oil prices hit a record near $140 a barrel last week and have doubled from a year ago, stoking inflation and triggering protests worldwide, and top energy policy makers meeting 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 over 30 years, and pledged on Sunday to open the taps wider still if the market demanded it.

It also sketched out plans to boost capacity to 15 million bpd when the future demand warrants the investment, hoping to soothe growing fears that the world is running out of oil, but those measures failed to take the edge off an anxious market.

"The short-term supply situation is still very tight and tensions between Iran and Israel are back in focus," Pervan said.

Iran will give a "devastating" response to any attack on the country, its defence minister was quoted as saying on Sunday, the latest volley in the ongoing war of words centred around Tehran's nuclear programme.

On Friday, the New York Times quoted U.S. officials as saying Israel had carried out a large military exercise, apparently a rehearsal for a potential bombing of Iran's nuclear facilities.

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