UPDATE 5-Oil falls as focus turns to demand erosian

                                
 * Rising prices raise prospect of demand erosian
                                
 * Portugal asks for EU help, following Greece and Ireland
                                
 * ECB lifts interest rates to 1.25 pct, as expected
                                
 * Coming up: Trichet speech, US weekly jobless at 1230 GMT
                                
 * Technicals: Brent to retrace to $119.79/bbl [ID:nL3E7F7041]
                                
 
                                
 (Updates prices, adds ECB interest rate)
                                
 By Zaida Espana
                                
 LONDON, April 7 (Reuters) - Brent crude futures dipped on
Thursday after five days of gains, hovering around $122 a barrel
on concerns that strong prices could crimp demand, with the
European Central Bank lifting rates to control inflation.
                                
 Brent crude <LCOc1> shed 28 cents to $122.02 a barrel by
1157 GMT. It hit a 2-1/2-year high above $123 on Wednesday,
driven by violence in the Middle East.
                                
 U.S. crude futures <CLc1> eked out gains, taking on 4 cents
to $108.87 a barrel after touching $109.15 on Wednesday, their
highest level since September 2008.
                                
 The European Central Bank fulfilled expectatives by raising
its key interest rate by 25 basis points to 1.25 percent on
Thursday, as it seeks to counter firming pricing pressure.
                                
 The widely anticipated move was in line with the forecasts
of analysts polled by Reuters, and analysts said had already
been priced in by the markets. [ECB/INT] [ID:nFLA7FE7M8]
                                
 "At current crude oil prices, the risk is turning more and
more to the amount of potential demand destruction,"
Petromatrix's Olivier Jakob said.
                                
 Euro zone debt worries and inflation are high on the agenda
after Portugal overnight asked for a EU bailout and on concerns
that a rise in euro zone interest rates would push up the cost
of debt for already highly indebted economies. Eyes remain now
on ECB President Jean-Claude Trichet's news conference at 1230
GMT for signs of future policy.
                                
 Oil prices slipped even after rebels said Muammar Gadaffi
damaged a pipeline connecting oilfields to the port town of
Marsa el Hariga. Analysts noted the supply disruptions may have
already been priced in. [ID:nLDE7352B6]
                                
 "We can't possibly justify a further sustained boost to
prices unless unrest erupts in an oil-producing country other
than Libya with serious threats to crude supplies," VTB Capital
analyst Andrey Kryuchenkov said.
                                
 Strong crude futures have pushed up prices at the pump
globally, further exacerbating the inflationary pressure
governments face from the rising cost of food and raw materials.
                                
 In Asia, China's central bank lifted interest rates this
week for the fourth time since October as it ramps up the battle
against inflation. [ID:nL3E7F51LX]
                                
 "Current price levels should have a negative impact on
demand," said Tetsu Emori, a Tokyo-based commodities fund
manager at Astmax Investments.
                                
 The International Energy Agency said on Wednesday that the
current oil price is harming global economic growth and is a
mounting concern for consuming nations. [ID:nLDE7351OQ]
                                
 Saudi Arabia and the United Arab Emirates have raised output
to compensate for supply loss from Libya, but there has been no
coordinated supply policy response from OPEC to rein in high
prices. [ID:nLDE7351IF]
                                
 "The nature of this lack of response and general drift of
recent policy statements suggests that producers are a long way
from seeking actively to bridle in the upside for prices,
leaving the door to $130 Brent swinging open," analysts at
Barclays Capital led by Paul Horsnell said in a note.
  <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
Reuters Brent poll results: http://r.reuters.com/ken88r
                                
ECB in graphics:            http://r.reuters.com/kah88r
                                
China fuel price rise:   http://link.reuters.com/xaq88r
                                
Middle East unrest:                     [ID:nTOPMEAST]
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
  On the data front, U.S. weekly jobless claims, due later on
Wednesday, were expected to have dipped to 385,000 in the week
ended April 2. The recent decline in filings for unemployment
benefits has coincided with faster job growth. [ECI/US]
                                
 On Wednesday, weekly U.S. government data showed that
gasoline demand at the world's top oil consumer fell 1.2 percent
from year-ago levels as prices at the pump neared $3.70 a
gallon.
                                
 Gasoline demand should pick up as the U.S. driving season
begins, but high prices would temper growth in consumption.
[ID:nN06224990]
                                
  (Additional reporting by Florence Tan in Singapore; editing
by William Hardy)