* U.S. jobless claims fall less than expected
* Dollar index falls to three-year low
* Libya supply disruptions, Bahrain unrest lend support
(Recasts, adds jobless data)
By Emma Farge
LONDON, April 21 (Reuters) - Oil prices reversed gains on
Thursday after a smaller-than-expected decline in U.S. jobless
claims dampened hopes for growth in the world's top oil
consumer, offsetting sharp dollar falls.
The number of Americans filing new claims for unemployment
benefits fell last week but held above the key 400,000 level,
hinting at some loss of momentum in the labour market recovery.
[]
ICE Brent crude futures for June <LCOc1> fell 33 cents to
$123.52 a barrel by 1354 GMT after earlier rising nearly $1.
The U.S. oil benchmark <CLc1> was down 16 cents at $111.29 a
barrel by the same time.
Earlier, both benchmarks were boosted by a slide in the
dollar index to a three-year low, making dollar-denominated
crude less expensive for buyers using other currencies and
prompting financial investors to shift funds into commodities.
[]
"(U.S.) crude has rallied from $105 to above $112 during the
week, and above $110 you run into stronger resistance and
concerns about high prices hurting demand. And the jobs claims
fell, but are still above 400,000," said Gene McGillian, analyst
at Tradition Energy in Stamford, Connecticut.
Oil is trading 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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RISK PREMIUM
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 Libyan unrest is lasting longer than expected and
creating a shortage of light, sweet oil. What refiners are
likely to do is replace this with more sour crude," said
Christophe Barret, analyst at Credit Agricole.
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. []
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.
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. []
(Additional reporting by Francis Kan in Singapore and Robert
Gibbons in New York; editing by Alison Birrane)
