(Updates prices, paragraph 4)
* Oil edges higher on supply concern, weak dollar
* Israel-Iran tension continues to support
* Traders await U.S. oil inventories, ECB meeting
LONDON, July 2 (Reuters) - Oil steadied near $141 a barrel
on Wednesday, within sight of a record high, boosted by
forecasts global supply will lag demand and further weakness in
the dollar.
Tension between Iran, a major oil exporter, and Israel also
lifted prices, and analysts said that could remain supportive
for the rest of the week ahead of the U.S. Independence Day
holiday in the United States.
"There could be short-covering as Iranian-Israeli tension
means few will want to go short into the long weekend," said
Mike Wittner, analyst at Societe Generale.
U.S. crude <CLc1> rose 6 cents to $141.03 a barrel by 1334
GMT, while London Brent <LCOc1> gained 54 cents to $141.21. U.S.
crude hit a record high of $143.67 on Monday.
Adding to concern about supply, the International Energy
Agency on Tuesday cut its global oil supply forecast for the
next five years, signalling little relief from high oil prices.
The weak dollar also supported crude. The euro extended
earlier gains against the dollar to hit a two-month high on
Wednesday as traders anticipated the European Central Bank would
raise interest rates on Thursday.
Investors have been using oil and other commodities as a
hedge against the weaker dollar and inflation, helping fuel the
market's rally of almost 50 percent since the start of the year.
Concern that tension between Israel and Iran, a major oil
exporter, could disrupt supplies from the Gulf region were in
part behind oil's climb to a record on Monday.
Iran's oil minister said Tehran would remain a reliable
source of supply but would respond if threatened.
"Iran has been always a reliable source of supply to the
market, and remains as a supplier forever," Gholamhossein Nozari
said on Wednesday at an energy conference in Madrid.
"If there would be any kind of activity of any sort, Iran is
not going to be quiet and is going to react, and nobody could
imagine what would be the reaction of Iran."
Iran's Revolutionary Guards had said they would impose
controls on shipping in the Strait of Hormuz if the country is
attacked.
But the U.S. Navy's Fifth Fleet said on Wednesday the United
States would not allow Iran to block the Gulf. About 40 percent
of seaborne oil trade passes through the strait, according to
the U.S. government.
Later on Wednesday, traders will look out for the latest
weekly report on U.S. inventories.
The Energy Information Administration report is expected to
show a 100,000-barrel fall in crude inventories, a
200,000-barrel fall in gasoline, and a 1.9-million-barrel rise
in distillates. []
(Additional reporting by Chua Baizhen and Barbara Lewis,
editing by William Hardy)
