Oil rises for 3rd session near $137 on supply worries

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Crude for August delivery was up 20 cents at $136.94 a barrel by 3:20 a.m. British time, after settling up $1.38 on Monday. It had hit a record high of $139.89 on June 16.

August London Brent crude was trading up 19 cents at $136.10 a barrel.

"The fundamentals are strong. We are all focusing on a test of a new record high of above $140," said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.

"Growing tensions between Iran and Israel and the strike in Nigeria are convincing funds to buy."

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.

Ongoing problems in Nigeria have been one of the supply factors that has helped push U.S. crude up by more than 40 percent this year.

Another is tension over Iran's nuclear programme, with analysts worried any conflict could shut the Straits of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula through which roughly 40 percent of the world's traded oil flows.

On Monday the European Union approved new sanctions on Iran, including an asset freeze on its biggest bank, over its refusal to meet demands to end its nuclear programme.

With top energy policy makers who met in Jeddah at the weekend offering little hope for a quick fix to supply concerns, there was little relief seen for oil prices.

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