Oil falls below $131

By Luke Pachymuthu

SINGAPORE (Reuters) - Oil retreated to just over $130 a barrel on Thursday, after a $2 jump in the previous session, as a strengthening dollar more than offset fears of supply disruptions in Nigeria.

Militants from the OPEC member said they planned to carry out a series of car bombings in the oil-producing Niger Delta to mark President Umaru Yar'Adua's first year in office.

U.S. crude fell 76 cents by 0210 GMT (3:10 a.m. British time) to $130.27 a barrel, after settling higher at $131.03 a day earlier, well over the session low of $125.96. London Brent crude fell 83 cents to $130.10 a barrel.

"The market rallied more than $5 off the lows. It's a little overcooked now, so it's not surprising that it's coming off close to $1. Sustained strength of the dollar will weigh on oil prices," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

The dollar was steady against the yen on Thursday, holding onto gains made in the previous session, following a better-than-expected report on U.S. durable goods orders which helped to ease worries over the outlook of the U.S. economy.

The dollar, which steadied at 104.72 yen from late U.S. trading on Wednesday, has maintained a strong negative correlation with commodities markets in recent months, with a weaker dollar strengthening the purchasing power of buyers using other currencies.

Oil prices have doubled since last year, buoyed by mounting fears of supply bottlenecks due to robust economic expansion in Asia and continued supply disruptions in key oil producers such as Nigeria.

But growing signs that consumer countries have trouble coping with surging prices has fuelled expectations that world energy use could taper off over the next few months, blunting some of oil's sharp edge.