NEW YORK — Oil prices rose Wednesday, rebounding from earlier losses on reports that Nigerian oil workers are about to strike and as investors focused on a surprise decline in gasoline inventories last week.

Retail gas prices slipped slightly for a second day, a sign that falling demand may be affecting prices and that prices at the pump may have caught up to crude oil's latest record advance.

Oil prices rose sharply in late afternoon trading on reports that talks between white-collar Nigerian oil industry workers and Chevron had broken down. Nigeria is Africa's largest oil producer and a major U.S. supplier.

The news out of Nigeria overshadowed a mixed weekly inventory report from the Energy Department's Energy Information Administration. Gasoline supplies fell 1.2 million barrels last week, where analysts surveyed by energy research firm Platts were expecting an increase of nearly 1 million barrels. However, the EIA also said demand for gasoline is down 1.8 percent, on average, over the last four weeks compared to last year.

Crude oil supplies fell 1.2 million barrels last week, less than the 2 million barrel decline expected by analysts, and inventories of distillates, which include heating oil and diesel fuel, rose 2.6 million barrels — more than expected.

The mixed data caused prices to jump more than a dollar immediately after the EIA report was issued, only to fall by more than $2 later. But prices rebounded on late afternoon reports out of Nigeria, and light, sweet crude rose $2.67 to settle at $136.68 on the New York Mercantile Exchange.

"Obviously, we're worried about supply, so any kind of headline is going to send prices back up," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

Also boosting prices, the dollar reversed earlier gains and lost ground against the euro Wednesday afternoon. Investors buy commodities such as oil as a hedge against inflation when the dollar falls. Also, a weaker dollar makes oil less expensive to investors overseas.

In a separate report Wednesday, the American Petroleum Institute, a trade group, said gasoline demand fell 1.4 percent in May, as measured by deliveries, dragging year-to-date demand for gasoline down by 1 percent. That's the first decline in gasoline demand over the first five months of any year since 1991, API said.

Demand for crude oil over the first five months of the year was off 2.5 percent from last year, API said.