* Dollar down 0.17 percent against currency basket
* France refinery strike enters sixth day
* Chinese refinery processing in Jan rises 29 pct on year
(Updates prices, quote paragraph 4)
By Alex Lawler
LONDON, Feb 22 (Reuters) - Oil held just below $80 a barrel
on Monday, paring much of an earlier gain to a six-week high, as
the dollar came under pressure and a strike at French oil
refineries entered its sixth day and spread to other plants.
The dollar weakened as the impact of last week's surprise
rise in a U.S. central bank emergency lending rate faded. Oil
also gained a lift from rising crude oil processing in China and
tensions over Iran's nuclear programme.
U.S. crude for March delivery <CLc1> rose 5 cents to $79.86
a barrel by 1446 GMT. It earlier reached $80.51 -- the highest
for a nearby contract since Jan. 13. Brent crude <LCOc1> for
April rose 1 cent to $78.20.
"We're seeing some risk appetite returning with the dollar
weakening against other currencies," said Mike Wittner, oil
analyst at Societe Generale.
A weaker dollar makes crude and other dollar-denominated
commodities cheaper for holders of other currencies and tends to
support oil prices. Gold climbed to a one-month high.
Oil in New York rose 7.7 percent last week, the largest
single-week percentage gain since October. The market's peak so
far in 2010 is $83.95 on Jan. 11.
Some investors have taken the view that the recent rally was
overdone, analysts said.
"Oil looked toppish at $80, that's the upper end of the
trading range," said Carsten Fritsch, analyst at Commerzbank.
"It's unlikely to see a level of $80 being sustained given
still-weak fundamentals. Physical demand is still lacklustre,
outside China at least."
STRIKE
Workers at Total's French refineries continued strike
action, raising concern about fuel supplies and supporting the
price of refined products such as gasoil.
The 339,000-bpd Gonfreville refinery will halt production
fully late on Tuesday due to the strike, the CGT union said.
Four other Total refineries are in the process of halting
production. []
Tension about Iran's nuclear work also provided support.
Iran has earmarked potential sites for new nuclear enrichment
plants and construction of two of them could begin this year, a
nuclear energy official said on Monday. []
More data emerged from China suggesting strong demand. The
China Petroleum and Chemical Industry Association (CPCIA) said
China processed 30.14 million tonnes of crude in January, up 29
percent from a year earlier. []
There are signs that oil inventories, which ballooned last
year and built up on tankers at sea as demand declined because
of the economic crisis while supply remained ample, are falling
further, according to analysts.
Societe Generale, in a note dated Friday, said preliminary
inventory data for the United States, Japan and Europe, as well
as short-term floating storage, showed a 2.17 million
barrel-per-day decline in crude and refined products stocks in
the first half of February.
"Stock movements -- building in January and falling sharply
in February so far, also neatly explain the price action,"
Societe Generale's Wittner said, referring to the rally in
prices over the past week.
Some think the rally has further to run. Goldman Sachs said
that benchmark oil prices will rise to $85-$95 a barrel this
year as global economic growth accelerates. []
(Additional reporting by Fayen Wong in Perth; Editing by
William Hardy)
