Oil rebounds on Iran missile test

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U.S. light crude for August delivery earlier rose more than $1, and was at $136.61 a barrel by 7:51 a.m. British time, up 57 cents.

London Brent crude also jumped more than $1, and was later at $137.13, up 70 cents.

Oil had lost more than $5 a barrel a day ago on the firmer dollar and the rally in U.S. shares, drawing cash away from the commodities complex. U.S. crude had slid nearly $10 from last Thursday's record high of $145.85 a barrel.

The U.S. dollar was supported after Federal Reserve Chairman Ben Bernanke had soothed credit concerns by saying the central bank may keep an emergency lending facility open beyond December for big Wall Street firms.

Iran's state media reported that Iran had test-fired nine long-and medium-range missiles, including one it has previously said could reach Israel and U.S. bases in the region.

The tests occurred at a time of increased tension between Iran and Israel over Tehran's nuclear programme, which the West fears is aimed at making bombs. Iran says its nuclear programme is for power generation.

Iran, the second-largest oil producer in the Organization of the Petroleum Exporting Countries, has been sending mixed signals over its nuclear programme and the possibility for conflict in the region amid an escalating war of words with Israel.

An aide to OPEC-member Iran's Supreme Leader was quoted on Tuesday as saying that Iran would hit Tel Aviv, U.S. shipping in the Gulf and American interests around the world if it is attacked over its disputed nuclear activities.

But President Mahmoud Ahmadinejad had said his country was not interested in war with either Israel or the U.S., adding Iran is trying to avoid conflict.

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