PERTH - Oil eased on Friday on profit taking after a near 4 per cent surge in the previous session to a record above US$140, as US lawmakers approved legislation aimed at curbing energy market speculation.

US light crude for August delivery was down 32 US cents at US$139.32 a barrel in Globex electronic trading by 0139 GMT, after falling as much as US$1.03 at the start of electronic trading.

London Brent crude fell 33 US cents to US$139.50.

The legislation, which still needs Senate approval, directs the Commodity Futures Trading Commission (CFTC), the futures market regulator, to use all its authority including emergency powers to 'curb immediately' the role of excessive speculation in energy futures markets.

Oil prices have doubled from US$70 a year ago on supply disruptions and geopolitical tensions in the Middle East.

Rising flows of cash into commodities from investors seeking to hedge against inflation and the weak dollar have also added to gains.

Analysts said that would probably be weeks or months before the legislation could come into effect and dealers would instead focus on supply risks and dollar movements in the short term.

'It may be months away before the legislation comes into effect but just the fact that it was passed is definitely enough to give the market a little bit of a bearish sentiment,' said Mr Hassall.

US oil hit a record of US$140.39 on Thursday after Libya said it was studying possible options to cut output in response to potential US actions against Opec countries.

'We are studying all the options,' Libya's most senior oil official Shokri Ghanem said by telephone, adding oil producers needed protection from what he viewed as US attempts to extend its jurisdiction beyond its territory.

Oil's rise was also bolstered by a weak dollar, which hovered near three-week lows against the euro on Friday due to weak US economic fundamentals and renewed credit concerns.

Opec president Chakib Khelil said in an interview on Thursday that prices could reach US$170 a barrel in the coming months, and he reiterated the cartel's position that speculation - not a supply problem - was driving oil to new highs.

'I forecast prices probably between US$150 and US$170 during this summer. That will perhaps ease towards the end of the year,' Mr Khelil told France 24 television, according to a text of the interview released by the station.

Talks between oil workers and Chevron continued in Nigeria, with the oil minister saying he was confident a deal could be reached, but union officials left open the possibility of a strike early next week. -- REUTERS