NEW YORK, Jun 10, 2004 (AP WorldStream via COMTEX) -- Crude futures in New York settled 2.4 percent higher Thursday as terrorism-wary traders bought extra contracts ahead of the three-day trading weekend.

The New York Mercantile Exchange and most other U.S. markets will close Friday to observe the funeral of former President Ronald Reagan. London's International Petroleum Exchange will observe a half day of trading.

"People are always nervous about what can happen during a long weekend," said DeCarlo Larry, associate director of collateralized financial markets in New York for bank Barclays Capital.

Nymex crude oil futures set for July delivery settled up 91 cents at $38.45 a barrel.

On London's International Petroleum Exchange, July Brent blend crude futures settled 45 cents higher at $35.74 a barrel.

Some market participants said Reagan's high-profile funeral Friday in Washington might present an opportunity for "something bad to happen," in the words of one analyst. President George W. Bush is scheduled to deliver a eulogy at the service.

During the last long weekend, which marked the Memorial Day holiday, terrorists staged an attack in Saudi Arabia's Khobar oil hub, catching many traders off-guard and sending Nymex crude futures to a new record high.

Although terrorism fears were foremost for many traders Thursday, some market participants were surprised at how quickly oil prices climbed. At the day's high, crude rose as much as $1.06 from Wednesday's settlement.

"We thought prices might come up, but we didn't anticipate them coming up by this much," said Michael Cambria, a vice president at Master Trading Inc., a New York brokerage firm.

Traders said crude's gains were augmented by the perception that the market had been oversold. Since reaching their record high of $42.45 a barrel June 2, crude futures prices had fallen nearly $5 a barrel before Thursday.

"The market got a little oversold technically," said Scott Meyers, a senior trading analyst for Pioneer Futures Inc. in New York.

A handful of analysts said Thursday's rally likely would wash out of the market with the weekend's passing. "Because this was a surprise short week, a lot of people who hedge their products as the week goes forward had to push all of their buying back," said Larry. Traders didn't learn of Nymex's shortened trading week until late Monday.

In the past two weeks, indications of rising oil supplies from the Organization of Petroleum Exporting Countries and the Department of Energy have put a lid on crude prices.

Mixed government inventory data this week showing increases in commercial crude and gasoline stocks and a draw in distillate stocks also helped shift some traders' buying interest to heating oil.

In Nigeria, talks were held late Thursday to end a two-day general strike that could threaten the flow of oil exports from the country, but labor leaders said later they planned to keep striking Friday.

Traders in New York said they would be watching deliberations, but had seen no sign yet of any oil disruptions.

The Nigeria Labor Congress called the strike to protest a rise in gasoline prices in the oil-rich west African nation.

Officials with oil companies active in Nigeria and the government's Department of Petroleum Resources said they were making contingency arrangements to contain the strike's impact on oil operations.