Oil eases towards $125 on stronger dollar

By Fayen Wong

PERTH (Reuters) - Oil fell on Monday, after topping $126 a barrel last week, as the market focused on a stronger U.S. dollar and put aside supply worries for now.

U.S. light crude for June delivery fell 54 cents to $125.42 a barrel by 7:30 a.m. BST. It struck a new record high of $126.27 on Friday, thanks to fuel supply concerns and a rush of speculator buying.

London Brent crude fell 77 cents.

"The dollar has strengthened so that could have pushed down oil prices. I think some people in the market are also taking profit after the strong rally last week," said Robert Nunan, assistant manager of risk management at Mitsubishi Corp in Tokyo.

The U.S dollar climbed back towards a two-month high versus a basket of currencies on Monday as weak economic data in Australia and New Zealand showed more signs of a global slowdown, giving the battered U.S. currency a boost.

Oil has jumped about 13 percent since slipping as low as $110.53 a barrel on May 1, as investors seized on supply disruptions in the North Sea and Nigeria, as well as galloping demand for distillate fuels, a category that includes diesel fuel and heating oil.

Analysts said recent outages have highlighted the vulnerability of oil supplies from several regions and ongoing violence in the Middle East would continue to fan supply fears.

Turkey said on Sunday it had launched air and artillery attacks against Kurdish separatist rebels in northern Iraq overnight after an insurgent strike on a military base.