* Oil off near 4-mth high at $51 after 7 pct gain on
Thursday
* Prices up 10 pct vs week earlier on Fed move, soft dollar
* Rally may not be sustained if U.S. dollar slides further
* Dollar extends losses after falling most since 1985
(Updates prices)
By Fayen Wong
PERTH, March 20 (Reuters) - Oil fell from a near 4-month
high to around $51 on Friday, paring the previous session's 7
percent gain, on doubts over the effectiveness of the U.S.
Federal Reserve's $1 trillion package to revive the economy.
Oil jumped on Thursday to $51.61 a barrel, the highest
settlement since Nov. 28, after the Fed's plan to fight
recession and a weak dollar boosted the appeal of commodities to
investors.
U.S. light crude for April delivery <CLc1>, which expires on
Friday, fell 49 cents or 0.9 percent to $51.12 a barrel by 0606
GMT, while the May delivery contract <CLc2> fell 29 cents to
$51.75.
London Brent crude <LCOc1> fell 29 cents to $51.75.
"Oil has had a very good run in the past few sessions and
some traders may see that it's a good time to take profit after
the surge last night," said Toby Hassall, head of research at
Commodities Warrants Australia.
"There could also be some uncertainties on the effectiveness
of the Fed's plan to revive the economy. It has no doubt given
the markets a shot in the arm but there is still unease about
the implications of the latest Fed action."
Investors are worried over the weakening dollar and
prospects of surging inflation once the economy starts
recovering, analysts say.
Oil prices have risen 10 percent since start of the week,
largely boosted by the weak dollar and hopes the Fed's move to
buy long-dated treasuries, its first large-scale purchase of
government debt since the early 1960s, would help lift the
battered U.S. economy out of a 14-month recession.
But with crude stockpiles swelling in the United States and
immediate energy demand still weak, some analysts cautioned that
it may be difficult for oil prices to sustain its recent rally.
"Unless the U.S. dollar continues to weaken, oil may have to
retreat below $50 a barrel," Hassall said.
The U.S. dollar headed for its biggest weekly fall in 24
years on Friday, sliding 5.1 percent against a basket of major
currencies, as investors feared the Federal Reserve's plans to
buy government debt would cheapen the world's reserve currency.
[]
Commodity prices rallied this week, with the
Reuters-Jefferies CRB index <.CRB>, a global commodities
benchmark, touching a five-week high Thursday, as the softer
dollar made them cheaper for overseas buyers, while others
looked for a hedge against potential inflation. []
In a further sign that the U.S. economy was still mired in a
deep recession, U.S. jobs data showed a record high in the
number drawing state unemployment benefits. []
The International Monetary Fund on Thursday forecast the
world economy will contract in 2009 for the first time since
World War Two by between 0.5 percent and 1.0 percent.
[]
U.S. bank JP Morgan upped its WTI crude oil price forecast
for 2009 to an average of $49.38 a barrel, up some $5 from its
previous estimate in December, the bank said in a monthly
report. []
(Reporting by Fayen Wong; Editing by Mike Nesbit)
