* Commods rally as weak dollar boosts risk appetite
* EIA weekly data shows U.S. crude oil stocks down
* IEA's Tanaka says high prices dampening demand
(Recasts, updates prices, market activity; new by-line, changes
dateline from previous LONDON)
By Gene Ramos
NEW YORK, April 20 (Reuters) - Oil prices rallied 3 percent
on Wednesday as U.S. crude oil inventories fell for the first
time in seven weeks and the dollar weakened further, fueling
investor appetite for riskier assets.
The oil rally extended gains for a second day and both
Brent and U.S. crude prices were racing back up toward 2011
highs.
ICE Brent crude for June delivery <LCOc1> rose $2.74 to
$124.07 a barrel by 12:10 p.m. EDT (1610 GMT) after surging to
an intraday high of $124.23. Brent hit a 32-month high above
$127 a barrel on April 11, but concerns about high prices
stifling fuel demand had since cut them back.
U.S. June crude <CLc1> gained $3.25 to 111.53, just below
its session high of $111.66.
U.S. crude inventories fell 2.32 million barrels last week,
bucking average analyst forecasts in a Reuters poll for a a 1.1
million barrel increase. It was the first drawdown since the
week to Feb. 25, []
The drawdown was prompted by a big drop in imports and a
steep climb in refinery utilization as U.S. refineries ended
spring season maintenance.
Drawdowns in gasoline stocks for the ninth week in a row
and and a decline in distillate supplies for a second straight
week added to a tightening of petroleum stockpiles in the
world's largest oil consumer.
"The inventory trend has been very bullish for the last 10
weeks. And this is partly supporting the strength in crude
pricdes outside geopolitics," said Mark Kellstrom, senior
analyst at Strategic Energy Research and Capital in Summit, New
Jersey.
WEAKER DOLLAR SPURS COMMODITY BUYING
Oil's rise on a weaker dollar was part of a commodities
buying binge, with gold setting a record above $1,500 an ounce,
as persistent worries about U.S. fiscal health drove investors
to seek alternative assets. []
"Oil is up there with gold as an inflation hedge for
investors," said Mike Zarembski, senior commodities analyst at
optionsXpresss in Chicago.
At the same time, "everyone is still afraid to be short
with the situation in the Middle East," Zarembski said.
The dollar index <.DXY>, which measures the greenback
against a basket of currencies, was down 0.85 percent. A
weaker U.S. currency can support dollar-denominated commodities
by making them cheaper for holds of other currencies.
"The dollar index has broken significantly below a
long-term multi-year trendline, so we could see the selling
accelerate," said GFT market strategist David Morrison.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Technical outlook on Brent http://link.reuters.com/wuz98r
Technical outlook on WTI http://link.reuters.com/vuz98r
More on Middle East unrest: [][]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
HIGHER OPEC OUTPUT?
The International Energy Agency's executive director, Nobuo
Tanaka, issued the latest warning that high oil prices could
reduce demand in top consumers the United States and China.
[]
OPEC needs to boost output in June or July to douse further
price rises, Tanaka said, adding that if crude prices stayed at
$100 a barrel or more for the rest of 2011, the market could
see demand destruction similar to that of 2008.
But OPEC itself sees oil prices between $80 and $90 as
"adequate" and has no plans for an emergency meeting because
the market is well supplied, Ecuador's Oil Minister, Wilson
Pastor, told Reuters in an interview.[]
(Additional reporting by Robert Gibbons in New York; Zaida
Espana and Claire Milhench in London; Francis Kan in Singapore;
Editing by David Gregorio)
