Saudi Bomb Plot Unnerves Oil Market

"Increased geopolitical turmoil has put the so-called ample-supplies situation on the back burner," said Phil Flynn, an energy analyst with Alaron Trading in Chicago. "Whether it's Iran, Nigeria, Venezuela or you name it, there seems to be a chance that any of these hotspots could dramatically alter the supply-side universe."

Militant attacks on Nigerian oil installations have driven down the west African country's production by one-fifth, or 450,000 barrels a day. Rebels are demanding a share of Nigeria's oil wealth and have threatened to step up their attacks over the next few days. Nigeria is the fifth-largest supplier of crude to the U.S. and has become increasingly important to the U.S. as it looks to reduce its reliance on Middle Eastern oil.

A standoff with Iran over its nuclear power ambitions has also kept traders on edge. Iran resumed small-scale uranium enrichment this month, in defiance of Western threats to slap economic sanctions against the country. The U.N. Security Council is set to discuss possible actions against OPEC's second-largest crude producer on March 6.

To avert a potential trade embargo, Russian and Chinese diplomats are in Tehran trying to hammer out a solution to the crisis. Iranian officials offered information on a uranium-processing facility linked to warhead design, Reuters reported. This is the second round of talks between the Russians and Iranians and may indicate that Tehran is trying to delay any Security Council actions.

Elsewhere, the Venezuelan government said it plans to sharply curtail the amount of air service U.S. carriers are allowed to conduct in the country. President Hugo Chavez has made no secret of his disdain for the U.S., and the move to limit airline traffic will do nothing to improve the tense relations between Caracas and Washington.

The Venezuelan government said the action was in retaliation for restrictions that have been in place for 10 years on flights to the U.S. by Venezuelan carriers.