* Dollar index at its lowest in three years
* U.S. crude and product stocks fall sharply - EIA
* Coming Up: U.S. weekly jobless claims; 1230 GMT
(Recasts, adds detail)
By Emma Farge
LONDON, April 21 (Reuters) - Brent crude oil rose above $124
a barrel on Thursday on a sharply weaker dollar and as a draw in
U.S. crude and fuel stocks pointed to tighter supplies in the
world's top oil user.
The dollar slid to a three-year low against a basket of
currencies, making dollar-denominated crude less expensive for
buyers using other currencies and prompting financial investors
to shift funds into commodities. []
ICE Brent crude futures for June <LCOc1> rose 22 cents to
$124.07 a barrel by 0940 GMT. The U.S. oil benchmark <LCOc1> was
up 48 cents at $111.93 a barrel by the same time.
Reuters data showed the correlation between a weakening
dollar and rising oil prices is the strongest this year.
U.S. crude and product inventories fell in the previous
session, in a move that analysts said might suggest oil prices
have not yet climbed high enough to significantly dent
consumption.
"The data from the U.S. was supportive since we have no
indication of falling demand. High prices aren't yet taking
their toll," said Christophe Barret, oil analyst at Credit
Agricole.
A rally in equities has also boosted investor appetite for
commodities, with European shares up for a third session. []
Oil prices are now within a few dollars of the 32-month high
of $127 a barrel, a level which representatives of consumer
countries have said are already high enough to dent fuel use.
International Energy Agency's executive director Nobuo
Tanaka said on Wednesday demand was already suffering and that
OPEC needs to raise output around June to stem further price
rises. []
But Ecuador's oil minister said OPEC had no plans for an
emergency meeting because the market was well supplied despite
unrest in Libya.
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Graphic on inverse correlation between oil and dollar:
http://graphics.thomsonreuters.com/gfx/MR_20112004144932.jpg
To view EIA's weekly crude figures, click here:
http://www.eia.gov/dnav/pet/pet_move_wimpc_s1_w.htm
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STOCKS DATA
U.S. stocks of the motor fuel gasoline fell 1.58 million
barrels for the ninth straight week and distillate stocks also
fell 2.5 million barrels, in signs that demand is fairly robust.
U.S. crude stocks fell unexpectedly by 2.32 million barrels
in the week to April 15, the report showed, compared with
expectations for a 1.1 million barrel build in a Reuters poll of
analysts. []
"The overhang of U.S. crude and oil product inventories...is
now at its lowest level since the end of 2008. Cushing
inventories have fallen and we continue to see WTI as being
underpriced relative to Brent," said analysts at Barclays in a
research note.
Oil prices are still holding a hefty risk premium due to
heavy fighting in OPEC member Libya where government troops are
pounding the rebel-held city of Misrata, with investors
concerned about a spread in supply disruptions to other parts of
the Middle East. []
Libya was Africa's third-largest producer, pumping around
1.6 million barrels per day of crude, before fighting between
Muammar Gaddafi's forces and rebel troops slashed output.
The main opposition group in Bahrain -- neighbour to top oil
producer Saudi Arabia -- warned on Wednesday that angry youths
from the Shi'ite majority could "explode" if the Sunni-led Gulf
Arab kingdom did not end a crackdown that has purged Shi'ites
from state jobs. []
"There's still more rumblings in Bahrain and we are
monitoring that carefully," said Rob Montefusco, an oil trader
at Sucden Financial, adding that Brent prices have strong
technical support above $121 a barrel.
Analysts will later look to key data including jobless
claims out of the United States for further insights on whether
high oil prices are placing a strain on the U.S. economy.
(Additional reporting by Francis Kan in Singapore; editing
by Alison Birrane)
