UPDATE 6-Brent seesaws after rally, U.S. oil up on down dollar

                                
 * Dollar index nears all-time low
                                
 * U.S. jobless claims down less than expected
                                
 * Coming up: Oil markets shut Friday ahead of Easter
 (Recasts, updates prices and market activity)
                                
 By Robert Gibbons
                                
 NEW YORK, April 21 (Reuters) - Brent oil futures <LCOc1> seesawed near
unchanged after slipping off a 32-month high Thursday as traders took some
money out of recently rising energy markets before a holiday weekend.
                                
 U.S. oil futures <CLc1> rose in choppy trading as a weaker U.S. dollar,
which fell to its lowest since 2008 against a basket of foreign currencies,
stoked risk appetite for the cheaper U.S. benchmark crude.
                                
 Separate reports showed the pace of factory activity in the U.S.
Mid-Atlantic region fell in April and U.S. initial jobless claims held
above 400,000 which cast some doubt on the pace of U.S. economic recovery
and how it could affect energy demand.
                                
 The dollar tumbled for a third straight day and the dollar index <.DXY>
neared an all-time low.
                                
 Brent crude for June <LCOc1> edged up 10 cents to $123.95 a barrel by
2:15 p.m. (1815 GMT), having earlier pushed up nearly $1 to $124.81, the
highest since April 11.
                                
 U.S. crude <CLc1> for June rose 70 cents to $112.15, just off an
earlier intraday high of $112.48.
                                
 Brent's premium to its U.S. counterpart <CL-LCO1=R> narrowed by 60
cents to $11.80 a barrel.
                                
 "Brent has lost a little momentum in its rally," said Gene McGillian of
Tradition Energy in Connecticut. "But it's still got a big advantage to
U.S. crude and that spread is unwinding a bit now."
                                
 Oil markets in the United States and Europe will be shut on Friday for
a holiday. For details click on [ID:nN21442533].
                                
 Unrest and geopolitical threats to oil supplies in Africa and the
Middle East remained supportive for prices, and brokers and analysts said
the risks would limit incentive to take profits after oil prices gained
this week.
                                
 Brent was trading within a few dollars of the 32-month high of $127 a
barrel reached earlier this month, a level which forecasters in consumer
countries have said is already high enough to hurt world oil demand.
                                
 The dollar has weakened this week after Standard & Poor's cut its
outlook for U.S. government debt to negative, leading some foreign exchange
analysts to tout the euro's potential as an alternative reserve currency.
[USD/]
                                
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 Graphic on inverse correlation between oil and dollar:
                                
 http://link.reuters.com/pyd29r
                                
 To view EIA's weekly crude figures, click here:
                                
 http://www.eia.gov/dnav/pet/pet_move_wimpc_s1_w.htm
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Both Brent and U.S. prices had jumped on Wednesday after the U.S.
government reported crude oil and refined products inventories fell.
[EIA/S]
                                
 JOBLESS CLAIMS, FACTORY DATA DISAPPOINT
                                
 A note of caution about oil demand came with a report showing that
while U.S. initial jobless benefit claims fell last week, they held above
the key 400,000 level, indicating possible loss of momentum in the jobs
recovery. [ID:nN21185697]
                                
 Adding to investor concern, the pace of U.S. Mid-Atlantic region
factory activity fell more than expected in April, after expanding at its
fastest pace in 27 years in March, the Philadelphia Federal Reserve Bank
said. [ID:nEAPAL0E20]
                                
 The International Energy Agency's Chief Economist Fatih Birol said oil
producing nations need to reassure the market after unrest in the Middle
East and worries about supply disruptions in the region pushed crude prices
to near 32-month highs. [ID:nLDE73K1M6]
                                
 With gasoline prices already $4 a gallon in some states, the Obama
administration unveiled a working group of federal agencies to probe
potential fraud in the energy markets. [ID:nN21278883]
                                
 AFRICA/MIDDLE EAST TURMOIL
                                
 Muammar Gaddafi's forces attacked a rebel-controlled oil pumping
station in eastern Libya, an official with an insurgent-run oil company
said on Thursday. [ID:nLDE73K12B]
                                
 The attack could delay efforts to restart production from the
rebel-controlled Sarir and Messla oilfields, where output was suspended
after an attack two weeks ago.
                                
 A new version of a Gulf Arab proposal to end Yemen's political crisis
called for a three-month transition plan that would end with a presidential
election, a senior Yemeni official told Reuters. [ID:nLDE73K11F]
 (Additional reporting by Emma Farge in London and Francis Kan in
Singapore, and Joshua Schneyer in New York; Editing by John Picinich)