* Dollar strength pares early gains
* Chinese Q1 GDP jumps 11.9 percent
* Coming up: Weekly U.S. jobless claims; 1230 GMT
(Changes dateline to London, updates throughout)
By Emma Farge
LONDON, April 15 (Reuters) - Oil prices hovered below $86 a
barrel on Thursday as strength in the dollar tempered an early
rally after news of surging growth in the world's number two oil
consumer China.
The dollar index strengthened by 0.4 percent on Thursday,
recovering from earlier losses triggered after the strong
Chinese economic data ramped up speculation of a yuan
revaluation, which is seen as negative for the dollar. []
Oil tends to fall as the dollar rises as it makes
commodities more expensive for buyers using other currencies.
Still, prices traded within $2 of 18-month highs struck
earlier this month as surging economic growth in China boosted
expectations for demand. China's economy grew 11.9 percent in
January-March -- the fastest quarterly growth since 2007.
The scorching growth raises the prospect of further yuan
appreciation, in a move thought to be bullish for oil as it
could improve China's buying power of dollar-denominated
currencies. []
Front-month U.S. crude <CLc1> fell 32 cents to $85.52 a
barrel at 0913 GMT after closing higher the previous day and
within sight of the 18-month high of $87.09 a barrel hit on
April 6. ICE Brent crude rose 10 cents to $86.25 a barrel by the
same time.
"We are looking at the data from China and this is very
supportive for the market," said Christophe Barret, oil analyst
at Credit Agricole Corporate and Investment Bank. "But I think
the growth was anticipated and was already in the prices."
SURPRISE DROP
Oil prices rose more than 2 percent in the previous session,
ending a five-day losing streak after U.S. government data
showed a surprise 2.2 million barrel drop in U.S. crude stocks
on Wednesday.
But the report also showed a larger-than-expected 1.1
million barrel rise in distillate stocks including diesel,
raising questions about the pace of the U.S. exit from
recession. []
"The demand side is going to get more attention with the
macro data coming out of the big consuming countries. Non-OECD
demand, especially from China and other east Asian countries,
has been very strong and the market is waiting for North America
to catch up," said Ben Westmore, a commodities analyst at the
National Australia Bank.
The Organization of the Petroleum Exporting Countries, in
its monthly report, said economic optimism was driving prices
and that it saw a "very comfortable outlook" for oil
fundamentals. The group also nudged up its forecast for 2010 oil
demand growth.
But for some analysts, prices near $85 a barrel could erode
demand in developed markets and prompt consumer switching to
cleaner fuels. "If prices remain at these levels for long, they
will have a strong impact on demand," said Barret.
Later on Thursday, investors will watch data on weekly U.S.
jobless benefit claims for further clues on the pace of
recovery.
On a technical basis, prices may be due for a small
correction on Thursday but upwards momentum is set to stay
intact. For a short-term technical outlook for crude, see here:
[]
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by Sue Thomas)
