* Brent falls below $122, down from 2-1/2 year high
* US crude also down ahead of EIA weekly inventory report
* But downside limited due to ongoing Gulf unrest
(Updates prices)
By Seng Li Peng
SINGAPORE, April 6 (Reuters) - Brent crude fell below $122 a
barrel on Wednesday from a 2-1/2 year high in the previous
session, as a Chinese interest rate hike dampened sentiment, but
widespread unrest in the Middle East will continue to underpin
the market.
Brent crude for May <LCOc1> fell 28 cents to $121.94 a
barrel at 0533 GMT after rising to $122.89 on Tuesday, the
highest since August 2008.
U.S. May crude <CLc1> shed 13 cents to $108.21 a barrel
at 0533 GMT.
Brent crude's premium to U.S. benchmark West Texas
Intermediate crude <CL-LCO1=R> was at $13.72 a barrel, trailing
record levels at $17.12 a barrel set on March 1.
"I expect Brent to remain on the uptrend. Technically, it is
possible for Brent to go to $125 a barrel within this week."
said Ken Hasegawa, commodity derivatives manager at Japan's
Newedge brokerage.
"When Brent moves to $125, WTI could go above $110, although
there is a small resistance now towards that level. After WTI
goes above $110, it may accelerate and move towards $115 next
week."
Brent's four-day rally to above $120 a barrel will soon
fizzle out, a majority of traders and analysts said in a Reuters
poll released on Wednesday, but it will roar back above $130 a
barrel in the second half of this year. []
China's central bank increased interest rates on Tuesday for
the fourth time since October, raising speculation that data to
be released next week by world's No. 2 oil importer may show
inflation rose more than expected in March. []
The increase comes before the European Central Bank is
expected to raise its rates on Thursday for the first time since
the global financial crisis, showing how inflation is rising to
the top of the global policy agenda.
But market attention remains mainly on the Gulf and its
widespread political turmoil.
MIDEAST UNREST
In Libya, a rebel spokesman said Gaddafi's forces bombarded
Misrata again on Tuesday. Another rebel in Misrata said two
people had been killed and 26 injured on Tuesday in mortar
attacks. []
Western powers have destroyed nearly a third of Gaddafi's
military since launching air strikes last month but NATO said it
was forced to change bombing tactics because of human shields.
[]
In Yemen, President Ali Abdullah Saleh urged the opposition
to join talks in Saudi Arabia to try to end weeks of turmoil and
violence in which at least three more people were killed on
Tuesday. []
Separately, Kuwait's emir on Tuesday asked the outgoing
prime minister to form a new government after the cabinet
resigned to avoid possible questioning over the issue of unrest
by Shi'ites in neighbouring Bahrain. []
In Bahrain, firms have fired hundreds of mostly Shi'ite
Muslim workers who went on strike to support pro-democracy
protesters, an opposition group said on Tuesday, in what
appeared to be part of a government crackdown. []
Oil prices could rocket to $200-$300 a barrel if the world's
top crude exporter Saudi Arabia is caught in the serious
political unrest, former Saudi oil minister Sheikh Zaki Yamani
told Reuters on Tuesday. []
He said he saw no immediate signs of further trouble
following protests last month calling for political reforms but
added that underlying discontent remained unresolved.
Amid the widespread tension, the African nation of Gabon was
able to resolve issues between workers and oil companies, which
are expected to restore crude production shortly after an oil
employees' union agreed to end a four-day strike.
[]
(Reporting by Seng Li Peng; Editing by Ed Lane)
