Oil nears $119 on storm fears

By Kevin Plumberg

HONG KONG (Reuters) - Oil prices rose for a fourth day on Thursday on worries that a tropical storm may strengthen to become the worst threat to U.S. offshore oil and gas production since 2005, while the euro rose on tough inflation talk from the European Central Bank.

Asian stocks were little changed, but commodity-related shares received a boost from rising metals prices and also from crude prices, which have recovered $7 since hitting a three-month low two weeks ago to trade above $118 a barrel.

European stock index futures pointed to a lower market open with instability in the financial sector a key focus.

The euro moved further away from Tuesday's six-month low versus the dollar as ECB officials overnight doused expectations that the next move in interest rates will be lower. Some officials even suggested increases might be needed, despite an economy that is shrinking and perhaps already in a recession.

"I'm not so surprised to hear some of these hawkish sounds coming from the ECB. They are facing after all inflation that is double their target," said Jan Lambregts, head of Asia research with Rabobank Global Financial Markets in Hong Kong.

"The big story continues to be about the euro zone and Japan and the disappointment in relative growth. People knew the situation in the U.S. wasn't great, but they are now having to face a deceleration in the euro zone a lot quicker than many had anticipated," he said.

The euro rose 0.5 percent against the U.S. dollar to $1.4782, and has recovered more than two cents from a six-month low of $1.4570 hit on Tuesday. It also gained 0.4 percent against the yen and sterling as dealers re-rated the expected differences in yield among the currencies.

The dollar fell 0.5 percent against the yen at about 109 yen well off a 7-month high around 110.66 yen set two weeks ago.