June 12 (Bloomberg) -- Crude oil rebounded after Nigeria's president said the country's state-owned oil company will take over operations in the Ogoni district of southern Nigeria from a Royal Dutch Shell Plc joint venture.

Removal of Shell will ``calm down'' unrest by Ogoniland residents, Nigerian President Umaru Yar'Adua said in a statement today after talks with French President Nicolas Sarkozy in Paris. Prices were down earlier today because a strengthening U.S. dollar reduced the appeal of commodities as an inflation hedge.

``The market is so concerned about supply that just about any headline can unnerve traders,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``Once prices began moving higher, there was a massive move to purchase futures.''

Crude oil for July delivery rose 36 cents, or 0.3 percent, to settle at $136.74 a barrel at 2:55 p.m. on the New York Mercantile Exchange, after falling as much as $4.83 a barrel today. Futures reached a record $139.12 a barrel on June 6.

``The volatility we're seeing shows that traders aren't comfortable at any prices right now,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``Something will have to break soon.''

Volatility is a measure of how far the price of a commodity such as oil deviates from average closing prices over a prior period, such as 30 or 365 days. Oil futures traded in New York veered 41.6 percent from the 30-day average today, according to Bloomberg data. They strayed 41.7 percent from the average yesterday, the highest volatility in 16 months.

`Violent' Moves

``We're moving violently in a broad range because there is a pervasive fear of doing anything in the market,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``We keep on running toward the $139 area, then backing down, which has got to make the bulls nervous. At the same time the shorts have taken it right in the chops.''

Short positions are bets that prices will fall.

Nigeria's Yar'Adua said June 4 that the country would name another operator of Ogoni operations, without saying who. Violence has shut about 20 percent of Nigeria's oil production since early 2006.

Shell, Nigeria's biggest foreign oil producer, was forced to quit Ogoniland in 1993, shutting oilfields pumping about 28,000 barrels a day because of threats to employees from local communities. Access to repair pipelines and installations there has frequently been denied by locals.

``This is actually bearish news because Shell has been unable to improve the situation on its own,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``We are taking the scenic trip to nowhere. There are great moves for the flimsiest of reasons.''

Brent crude oil for July settlement rose $1.07, or 0.8 percent, to close at $136.09 a barrel on London's ICE Futures Europe exchange. Prices climbed to a record $138.12 on June 6.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: June 12, 2008 15:27 EDT