UPDATE 10-Oil rallies above $124 on U.S. draw, dollar

                                
 * Commodities rise as weak dollar boosts risk appetite
                                
 * EIA weekly data shows U.S. crude oil stocks down
                                
 * IEA's Tanaka says high prices dampening demand
                                
 * Coming Up: U.S. jobless claims, 8:30 a.m. EDT Thursday
(Recasts, updates prices, market activity)
                                
 By Gene Ramos
                                
 NEW YORK, April 20 (Reuters) - Brent oil surged to nearly
$124 a barrel on Wednesday as U.S. crude oil inventories fell
for the first time in seven weeks and the dollar weakened
sharply, fueling investor appetite for riskier assets.
                                
 Oil's rise was part of a broader commodities buying binge,
with gold setting a record above $1,500 an ounce. Persistent
worries about U.S. fiscal health punished the greenback and
drove investors to seek assets with potentially richer returns.
U.S. equities markets also rose, driven by strong corporate
earnings reports. [.N] [ID:nN20152535]
                                
 ICE Brent crude for June delivery <LCOc1> settled up $2.52
a barrel to $123.85, after reaching 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 world fuel demand had
since cut them back.
                                
 U.S. June crude <CLc1> gained $3.17 a barrel to settle at
$111.45 a barrel, the highest since April 18, when U.S. crude
posted its steepest close of 2011 at $112.79.
                                
 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, [EIA/S]
                                
 A big drop in U.S. crude imports and a rise in refinery
utilization as plants emerged from spring maintenance also
helped to prompt a ninth-consecutive drawdown in U.S. gasoline
stocks and a second weekly decline in U.S. distillate supplies,
EIA data showed.
                                
 "The inventory trend has been very bullish for the last 10
weeks. And this is partly supporting the strength in crude
prices outside geopolitics," said Mark Kellstrom, senior
analyst at Strategic Energy Research and Capital in Summit, New
Jersey.
                                
 The latest drop in gasoline stocks came as demand was
expected to rise further in this week's Easter holiday driving,
ahead of U.S. summer driving season beginning on Memorial Day
at the end of May.
                                
 Rising pump prices haven't yet hindered Americans' penchant
to hit the roadways, the latest date from the U.S.
Transportation Department showed.
                                
 In February, U.S. highway travel rose 0.9 percent from a
year earlier, with vehicle miles up for the 12th month in a
row. [ID:nN20156687]
                                
 WEAKER DOLLAR IMPACTS COMMODITIES
                                
 The dollar index <.DXY>, which measures the greenback
against a basket of currencies, was down 0.87 percent, dipping
to near its lowest point since 2008.  A weaker U.S. currency
can support dollar-denominated commodities by making them
cheaper for holders of other currencies.
                                
 Reuters data showed the correlation between a weakening
dollar and rising oil prices has reached its most accentuated
 level of 2011.
                                
 For a dollar/oil correlation graphic click here:
http://graphics.thomsonreuters.com/gfx/MR_20112004144932.jpg
                                
 "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 (political unrest) situation in the Middle East,"
Zarembski said.
                                
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 Technical outlook on Brent http://link.reuters.com/wuz98r
                                
 Technical outlook on WTI http://link.reuters.com/vuz98r
                                
 More on Middle East unrest:  [nTOPMEAST][nLDE71O2CH]  
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 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.
[ID:nL3E7FK15D]
                                
 OPEC should 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.[ID:nN20155751]
  (Additional reporting by Robert Gibbons in New York; Zaida
Espana and Claire Milhench in London; Francis Kan in Singapore;
Editing by David Gregorio and Sofina Mirza-Reid)