RTRS: UPDATE 1-Brent steady above $121 after dollar weakens
* U.S. crude stocks up more than expected
* Chinese tightening concerns weigh; muted impact seen
* U.S. crude hits 2-week low of $108.43
* Coming up: BoE rate decision; 1100 GMT
* ECB rate Decision; 1145 GMT (Updates prices)
By Francis Kan
SINGAPORE, May 5 (Reuters) - Brent crude was steady above $121 a barrel on Thursday, as a sharp rise in U.S. crude stocks and disappointing economic data from the world's biggest energy consumer was offset by a weaker dollar.
The U.S. Department of Energy said weekly crude stocks rose by 3.4 million barrels even as imports fell, contrary to analyst expectations for a 2 million-barrel gain.
Prices were also weighed down by U.S. data that showed a sharp slowdown in the vast services sector and less hiring by private companies in April, indicating a sputtering recovery in the world's largest economy. [ID:nN04209762]
The data does not bode well for a key labour report on Friday, one of the most closely watched U.S. economic indicators.
"The inventory numbers and concern over the U.S. economy are the main factors driving the markets lower today," said Michael Lo, a Hong Kong-based analyst with Nomura International.
However, prices were supported by a weaker dollar as the greenback fell 0.1 percent against a basket of currencies, reversing an earlier gain of 0.2 percent.
ICE Brent crude for June LCOc1 fell 9 cents to $121.10 a barrel by 0536 GMT, after briefly turning positive. U.S. crude CLc1 was down 43 cents at $108.81, after hitting a two-week low of $108.43 earlier.
According to technical charts, Brent crude is forecast to fall further to $119.03 per barrel, while U.S. crude futures are headed to $107.52, said Reuters market analyst Wang Tao. [ID:nL3E7G501B] [ID:nL3E7G500U]
Oil has traded in a tight inverse correlation with the dollar this week, but the relationship broke down on Wednesday as both the dollar and oil slipped.
The euro hovered near a 17-month high versus a droopy dollar on Thursday as markets braced for more hawkish rhetoric from the European Central Bank after its policy meeting later in the day.
Tensions in the Middle East and North Africa that helped push oil prices to 32-month peaks last month persisted, as Syrian tanks and armoured vehicles deployed around the town of Rastan on Wednesday, witnesses said.
Meanwhile, Britain is working to close any loopholes in international sanctions aimed at preventing Libyan leader Muammar Gaddafi's government from funding itself through oil exports, a British minister said. [ID:nLDE7432FV]
CHINESE MONETARY POLICY
Fears that China may further tighten monetary policy to fight inflation also weighed on prices, but analysts pointed out that any impact on oil would be muted as such moves had been widely anticipated by the market.
Signs that Chinese inflation was slowing bodes well for prices in the longer-term, they added.
"There are some indicators pointing to the economy moderating and that might mean the Chinese government might not tighten further, and that's positive for the market," said Lo.
In Hanoi, China's Vice Finance Minister Li Yong said on Wednesday the government would continue to use measures such as higher interest rates and bank deposit requirements to curb inflation. [ID:nL3E7G421O]
Chinese inflation will moderate in the second half of the year as government measures to curb price rises hit their mark, a vice central bank governor said in remarks published on Wednesday. [ID:nL3E7G403Y]
Soaring food and energy prices may also temper Asia's economic outlook this year, putting central bankers in a tight spot as they try to cap inflation without choking off growth, Reuters polling data showed. [ID:nL3E7G30BY]
