* Oil above $50, earlier hits highest since Dec. 1
* U.S. dollar declines after falling most since 1985
* World economy in 2009 to shrink by 0.5 pct to 1.0 pct-IMF
* Saudi Arabia says hopes for gradual rise in oil prices
(Updates prices)
By Alex Lawler
LONDON, March 19 (Reuters) - Oil jumped more than 5 percent
on Thursday to above $50 a barrel after the U.S. Federal Reserve
announced a new plan to fight recession and a weak dollar
boosted the appeal of commodities to investors.
The Fed announced on Wednesday it would pump another $1
trillion into the U.S. economy by buying long-term government
debt for the first time since the 1960s and by expanding
purchases of mortgage bonds. []
"We have for the time being a return to risk appetite in the
oil market and it's based on the Fed's announcement yesterday,"
said analyst Mike Wittner of Societe Generale. "That's having a
positive impact on sentiment."
U.S. crude for April <CLc1> was up $2.60 a barrel at $50.74
by 1355 GMT, having earlier traded as high as $52.25, the
highest since Dec. 1, 2008. London Brent for May delivery
<LCOc1> rose $2.56 to $50.22.
Other commodities also advanced as the Fed's plan aroused
expectations that demand may increase. Copper jumped more than 5
percent to a four-month high. European stocks rose and Wall
Street made early gains.
The $50-mark has been the top of oil's trading range so far
in 2009. A close above that level is needed to increase the
prospect of a further rally, said analysts who use past price
moves to predict future direction.
Oil eased from intra-day highs after U.S. jobs data showing
a record high in the number drawing state unemployment benefits
highlighted the extent of the downturn in the world's top oil
consumer.
The International Monetary Fund said the world economy will
contract in 2009 for the first time since World War Two by
between 0.5 percent and 1.0 percent. []
WEAKER DOLLAR
Oil is unlikely to hold above $50 for very long, despite the
Fed's move, Wittner said.
"After this initial optimism fades, I don't think we'll stay
there as the focus will shift to whether these measures will
actually work.
"The simple fact is we're not going to know the answer to
that for some months."
The dollar dropped against a basket of currencies on
Thursday, after posting its biggest daily fall since 1985.
<.DXY> A weak dollar can boost investor demand for oil and other
commodities priced in the U.S. currency.
Besides technical resistance, falling demand could also
limit oil's gains in the near term.
On Wednesday, oil fell after data showed U.S. crude
inventories ballooned to the highest in nearly two years and the
World Bank cut its 2009 forecast for China's economic growth.
[]
Slumping demand and rising inventories have helped drag oil
down from a record high near $150 reached last summer as the
economic crisis hit consumption across the globe.
Analysts say oil, which sank below $33 in December, has
stabilised around $40 to $50 due to OPEC supply curbs of 4.2
million barrels per day, but the grim economic outlook is
standing in the way of a further advance.
The Organization of the Petroleum Exporting Countries
pledged to comply more strictly with its supply curbs at a
meeting on Sunday. It meets again to set oil output policy on
May 28.
Saudi Arabian Oil Minister Ali al-Naimi, the group's most
influential voice, said on Wednesday he believed OPEC had
managed to put a floor under the market. []
"I think OPEC has succeeded in stabilising prices," he said.
"The next thing is to hope for a gradual improvement in prices
over time."
(Additional reporting by Fayen Wong; Editing by James Jukwey)
