Oil rises on weak dollar

NEW YORK (Reuters) - Oil rose on Friday on the weak U.S. dollar and ongoing long-term supply concerns that briefly pushed oil to a peak over $135 this week.

U.S. light crude settled up $1.38 to $132.19 a barrel, after hitting a record $135.09 during intraday trade on Thursday. London Brent gained $1.06 to $131.57.

Oil prices have climbed by around a third since the start of the year as investors seeking a hedge against inflation and the falling U.S. dollar pile into commodities.

The dollar looked set on Friday for its steepest weekly fall against a basket of major currencies in two months on concerns about the U.S. economy's vulnerability to slower growth and rising inflation.

Further support has come from worries supply will struggle to keep up with demand over the next few years amid forecasts for tepid growth outside of the Organization of the Petroleum Exporting Countries (OPEC).

"The severity of non-OPEC supply weakness stands out as a primary factor behind the strong run-up in prices through the year so far," Barclays Capital said in a research note.

Non-OPEC production has stagnated and will remain below 50 million barrels per day this year, a Reuters survey of 12 analysts showed on Thursday.

Analysts say expectations that resource nationalism by oil producing countries emboldened by high prices will continue to limit international oil companies access to reserves, are also damping long-term supply growth forecasts and lifting long-dated crude futures.

High oil prices have hurt demand growth in top consumer the United States, and could curb usage in Asia as well.