UPDATE 7-Oil hits fresh peaks on Middle East, weak dollar

                                
 * Euro hits 14-month high ahead of ECB rate decision
                                
 * OPEC members say can do little to control prices
                                
 * China hikes fuel price 5 pct, trails rising crude
                                
 * U.S. stockpiles data mostly in line, crude up
                                
 
                                
 (Updates with U.S. stockpiles)
                                
 By Dmitry Zhdannikov
                                
 LONDON, April 6 (Reuters) - Oil prices hit fresh peaks on
Wednesday, rising to their highest since August 2008, buoyed by
unrest in the Middle East and North Africa and dollar weakness
ahead of an expected European Central Bank interest rate rise.
                                
 Brent crude <LCOc1> rose $1 to breach $123 a barrel, its
highest since August 2008, and U.S. crude <CLc1> rose to its
highest since September 2008 above $109.
                                
 Both contracts pared gains later in the day after a U.S. oil
data release, trading mostly flat versus Tuesday's close.
                                
 The ECB is expected to raise interest rates by 0.25 percent
on Thursday in the first hike since the 2008 financial crisis.
The expectations have propelled the euro to a 14-month high
while the dollar index <.DXY> was down 0.34 percent at 1450 GMT.
[ID:nLDE7350B9]
                                
 "Central bankers will always claim that they have no
influence on oil prices but recent history has repetitively
shown that in the new world, where commodities are a global
asset, central bankers can have a greater influence on oil
prices than OPEC," said Olivier Jakob from Petromatrix.
                                
 Members of the Organization of the Petroleum Exporting
Countries said on Wednesday they could do little to control
prices driven by speculators betting on "worst case scenarios"
and said the market had all the oil it needed. [ID:nLDE7351IF]
                                
 The rally in the euro took place even though Moody's rating
agency cut several Portuguese banks [ID:nLDE7350HL] and the
country paid higher costs at a T-bill auction. [ID:nLIS002626]
                                
 Analysts said a return of risk appetite amid expectations of
strong recovery in the United States had outweighed yet another
increase in China's interest rates on Tuesday, the fourth since
October, to tame inflation.
                                
 "Tightening measures have been in place since H2 2010
without any noticeable drag on oil demand," said James Crandell
from Barclays Capital. "Indeed, Chinese oil demand strength of
late has been herculean, up 10 percent year-on-year," he added.
                                
 
                                
 CHINA RAISES PRICES
                                
 Also on Wednesday, China raised retail gasoline and diesel
prices by 5.0-5.5 percent but the country's battle with
inflation prompted analysts to suggest the government may
refrain from announcing bigger rises. [ID:nL3E7F6146]
                                
 A Reuters poll showed on Wednesday China was expected to
raise interest rates only once more this year as it is heading
for a pause in its cycle of monetary tightening. [ID:nL3E7F61JY]
                                
 Singapore-based Serene Lim of ANZ said the impact from the
hike would be mitigated by the turmoil in Libya.
                                
 "It is a stalemate in Libya and this will give support to
oil prices, which are trading at a very tight range," she said.
                                
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 ECB in graphics               http://r.reuters.com/kah88r
 For latest U.S. oil inventory data see:   [API/S] [EIA/S]
                                
 FACTBOX on Libya's oil production:        [ID:nLDE72U0ZR]
                                
 More on Middle East unrest:                [ID:nTOPMEAST]
                                
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 In Libya, the head of the rebel army said NATO had been too
slow to order air strikes to protect civilians. [ID:nLDE7342BL]
                                
 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. [ID:nLDE73425B]
                                
 U.S. Energy Information Administration data was in line with
expectations showing oil stocks rose slightly more than forecast
and gasoline stocks fell slightly less than forecast.
[ID:nN06134822]
                                
 "It is hardly surprising that U.S. oil is not able to keep
up with the latest rally and is even tending a little softer,"
analysts at Commerzbank said in a note.
                                
 "This is because the tensions in North Africa are largely
behind the rise in prices while the supply situation in the U.S.
essentially remains relaxed."
                                
 Technical analysis showed Brent could rise above $126, said
Reuters analyst Wang Tao. [ID:nL3E7F6052]
                                
 Brent's rally to above $120 a barrel could soon fizzle out,
according to a majority of traders and analysts in a Reuters
poll released on Wednesday. But they expected Brent to roar back
above $130 in the second half of this year. [ID:nN05126895]
 (Editing by James Jukwey)