July 28 (Bloomberg) -- Crude oil may rise on concern that the conflict between Israel and Hezbollah may widen and militant attacks will curb shipments from Nigeria.

Eighteen of 40 analysts and traders surveyed by Bloomberg News, or 45 percent, said prices will rise next week. Nine projected a decline and 13 said futures would be little changed. Last week 50 percent predicted an increase.

A meeting of foreign ministers in Rome on July 26 failed to reach agreement on a military force for southern Lebanon that could help end the fighting in the Middle East, source of almost a third of the world's oil. Royal Dutch Shell Plc halted exports from a terminal in Nigeria on July 26. The drop in shipments is occurring during the summer driving season when U.S. gasoline demand peaks.

``The Israeli-Hezbollah conflict is likely to escalate, reigniting fears over Iranian involvement and the prospects for oil supplies,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``In addition, Nigeria and other trouble spots will continue to play into a bullish confluence of events that should send prices higher.''

Crude oil for September delivery declined $1.19, 1.6 percent, to $73.24 a barrel this week on the New York Mercantile Exchange. Prices are up 22 percent from a year ago. Oil jumped to a record $78.40 a barrel on July 14.

Prices surged in 1974, helping spur a recession in the developed world, after an oil embargo that followed the Arab- Israeli war in October 1973. Oil more than doubled in 1979 after Iran's revolution slashed the nation's exports. By February 1981, U.S. refiners were paying an average $39 a barrel for imported oil, the Energy Department said, or $86.88 in 2006 dollars.

Previous Invasion

Hezbollah seized two Israeli soldiers during a cross-border attack on an army unit July 12, sparking Israel's largest military offensive in Lebanon since 1982. Israeli troops led by Ariel Sharon invaded Lebanon in 1982 to root out the Palestine Liberation Organization.

``I don't think there will be a disruption of oil shipments, especially since Saudi Arabia, Kuwait, Qatar and Egypt have all expressed great displeasure with Hezbollah for starting this crisis,'' said Mordechai Abir, director of energy research at Burnham Securities Inc. in New York. ``Oil was never cut off in 1982 when Israeli forces under Sharon entered Beirut.''

Prices have risen 20 percent this year partly on concern that shipments from Iran, the fourth-biggest oil producer, may be disrupted because of a disagreement about its nuclear program.

Failed Conference

The Rome conference broke up after failing to reach agreement on the terms of a cease-fire in Lebanon. U.S. Secretary of State Condoleezza Rice, backed by U.K. Foreign Secretary Margaret Beckett, resisted calls from 13 other countries and United Nations Secretary General Kofi Annan for an immediate end to fighting.

``A solution to the Lebanon conflict is appearing distant and the recent re-emergence of the rebels in Nigeria will frighten the markets anew,'' said Andrew Harrington, an analyst at Australia and New Zealand Bank in Sydney. ``Despite the high level of stocks, capacity remains very tight.''

Shell said this week that it had stopped some production because of a pipeline leak in the Niger delta, bringing the total amount of oil shut in by Shell's Nigerian joint venture to 653,000 barrels a day. Militants threatened yesterday to resume attacks on oil facilities in the delta by mid-August.

``Demand is not moderating greatly in the face of higher prices, and on the supply side there is a litany of events, real and potential, that point to higher prices ahead,'' said Rowan Menzies, a commodity analyst at Commodity Warrants Australia Pty in Sydney.

U.S. Inventories

U.S. gasoline inventories fell 3.16 million barrels to 211 million barrels last week, the biggest drop since April, the Energy Department reported July 26. Over the past four weeks demand for gasoline, as measured by products supplied, has averaged 9.6 million barrels a day, up 1.8 percent from the same period last year.

Some analysts looking for a price decline said supplies of crude oil and fuel are higher compared with previous years. Oil inventories last week were up 9.9 percent from the five-year average for the week, the department said. Gasoline stockpiles were up 0.3 percent.

``The oil market is carrying a big year-on-year price premium despite DOE crude stocks that are higher than a year ago,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``That price premium is thus 100 percent dependent on increased geopolitical and hurricane risk.''

The Atlantic hurricane season, which lasts from June through November, threatens oil facilities along the U.S. Gulf of Mexico coast.

``Any Israeli cease-fire agreement or Iranian acceptance of proposals to limit its program of uranium enrichment, and the market could fall hard,'' Evans said.

The survey has correctly predicted the direction of prices 51 percent of the time since it was introduced in April 2004.

     Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

               RISE      NEUTRAL    FALL
                18          13       9

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

Last Updated: July 28, 2006 15:43 EDT