* Oil below $142, still up almost 50 pct in 2008
* Dollar gains against major currencies
* Iran vows to pursue its uranium enrichment work
(fixes dollar direction in paragraph 1)
By Alex Lawler
LONDON, July 7 (Reuters) - Oil retreated to below $142 a
barrel on Monday as the dollar gained, taking a pause from a
record-breaking rally that has lifted prices by almost 50
percent this year.
Investors were also eyeing signals from Iran, the world's
fourth-largest oil exporter, in its dispute with the West over
its nuclear work, and some saw signs that Iran may be more
flexible in negotiations.
"It's mainly the stronger dollar," said Nauman Barakat,
senior vice president at Macquarie Futures USA, of oil's drop.
"We might see further correction all the way down to the $140
area."
U.S. crude <CLc1> traded at $141.43 a barrel by 1440 GMT,
below Friday's intra-day low of $143.22. Brent crude <LCOc1>
fell $2.12 to $142.30.
The New York Mercantile Exchange did not issue an official
Friday closing price due to the July 4 holiday.
On Monday, the dollar reached a one-week high against a
basket of major currencies, benefiting from a European Central
Bank tone that has reduced expectations of further interest rate
rises.
Strength in the U.S. dollar can reduce the appeal of oil and
other commodities to investors as a hedge against inflation.
MIXED SIGNALS
Oil in New York hit a record $145.85 on Thursday, but later
eased as traders anticipated lessening tensions between Iran and
the West after Tehran responded to a package of incentives to
try to resolve the dispute.
But Iranian President Mahmoud Ahmadinejad said on Monday
Iran would not abandon its right to enrich uranium and rejected
a major powers' demand to do so as "illegitimate," the official
IRNA news agency reported.
Tehran's foreign minister on Sunday expressed optimism about
what he said was a "new environment" for talks.
"Iran shows signs of improved lines of communication," said
Barclays Capital in a report.
Oil has gained almost 50 percent this year, driven partly by
tension over Iran's nuclear programme and expectations that
global supply will fail to keep pace with demand from fast
growing Asian economies such as China.
The rally has led to fuel protests worldwide and begun to
dampen demand in some consumer nations, including the United
States, the world's biggest energy user. World leaders are
concerned prices could move even higher.
Leaders of the Group of Eight nations gathering for a summit
in Japan fear further rises, Italian Prime Minister Silvio
Berlusconi said.
"There are fears oil prices could increase further. Some
people fear they could reach $200," Berlusconi told reporters on
the sidelines of the summit.
(Additional reporting by Fayen Wong; editing by James Jukwey)
