US Treasury Secretary Henry Paulson is setting out on a tour of the Middle East with a mission to boost oil output by encouraging more private investment.

"I think there'd be a broad-based recognition that there's not enough supply in the global markets," Treasury official David McCormick said in a briefing on Paulson's trip. "We want to encourage additional investment in that global capacity."

Paulson will visit Saudi Arabia, Qatar and the United Arab Emirates this week argue that they should allow private sector investment to ease oil supply constraints.

Government policies that ensure capital can flow to markets that can develop additional oil production capacity are "a worthwhile pursuit", he said.

Paulson will also push the case for greater Arab investment in the US, which took a hit following the forced collapse of a deal by Dubai Ports World to buy several US port operations from P&O.

The price of London's Brent oil slipped 82 cents a barrel to $130.11 today, while New York crude fell 64 cents to $130.39.

Dealers said the strengthening dollar had offset fears that supplies from Nigeria could be cut by terrorist attacks. Militants there said they planned a series of car bombings in the Niger Delta to mark the first anniversary of President Umaru Yar'Adua's time in office.