(Updates lead and prices)
LONDON, June 6 (Reuters) - Oil rose by more than $2 a barrel
to above $130 on Friday, extending large gains in the previous
session as the U.S. dollar weakened on signals the European
Central Bank may raise interest rates this year.
Comments from Israel's transport minister that an attack on
Iranian nuclear sites looks "unavoidable" given the apparent
failure of sanctions to deny Tehran technology with bomb-making
potential also helped drive prices higher.
This was the most explicit threat yet against Iran from
Prime Minister Ehud Olmert's government. []
U.S. light crude for July delivery <CLc1> was up $2.30 at
$130.09 a barrel by 0930 GMT.
Oil surged $6 in after-hours trading on Thursday in the
U.S., erasing two days of sharp losses triggered by worries that
high oil prices were starting to dent demand.
London Brent crude <LCOc1> rose $2.07 cents to $129.61.
Analysts said the dollar's weakness in the wake of comments
from the ECB sparked a rush to cover oversold positions.
"We may well see a follow through rally today as traders
will be nervous of too much short exposure as fundamental
headlines still emanate from a bullish stance," said Robert
Laughlin at MF Global.
Societe Generale's head of commodities derivatives in Asia,
Marc Lansonneur, said the market was in a state of uncertainty
after Thursday's $6 move.
"If oil continues to rise, it could test $135 or
$140...Today will be a key day because we'll see whether the
rebound was purely technical or not. It could set the trend for
next week," he added.
The dollar was steady against the euro on Friday, having
fallen by more than 1 percent on Thursday after European Central
Bank President Jean-Claude Trichet said a number of policymakers
wanted higher interest rates and a hike was possible as soon as
next month. []
DEMAND
The sharp reversal in the dollar put longer-term worries
about weakening oil demand on the backburner, after they were
rekindled earlier this week when India and Malaysia decided to
raise domestic fuel prices to cope with bulging subsidy bills.
The International Energy Agency (IEA), an adviser to 27
industrialised countries, issues its latest forecasts next week
and has said it may lower its 2008 demand growth projection
further, after having already more than halved it to 1.03
million barrels per day (bpd).
But some analysts say subsidy cuts in Asia will not be
enough to slow oil use.
"World oil demand growth is still accounted mostly by China,
the Middle East and Latin America -- and through the summer,
there is no reason to expect a material slowdown in demand
growth in these areas," said Harry Tchilinguirian, oil analyst
at BNP Paribas in London.
Ahead of a weekend meeting of G8 energy ministers plus their
peers from China, India and South Korea, to try and agree on the
role of consumer nations in stemming oil's five-year price
rally, the IEA warned that oil demand would rise by 70 percent
if governments continued with current policies.
It also urged world governments to start a $45 trillion
dollar "energy technology revolution" or risk a 130 percent
surge in carbon emissions by 2050. []
(Reporting by Santosh Menon in LOndon and Maryelle Demongeot in
Singapore; editing by James Jukwey)
