Oil near $125 a barrel, eyes dollar

By Jane Merriman

LONDON (Reuters) - Oil rose on Thursday, boosted partly by weakness in the U.S. dollar after strong economic growth data from France and Germany pushed the euro higher.

U.S. crude was up 86 cents a barrel at $125.08 by 1102 GMT. U.S. crude oil options for June expire later on Thursday.

London Brent , whose nearby June contract expires later on Thursday, was up 87 cents at $122.73.

Oil had retreated on Wednesday from a record high near $127 a barrel reached in the previous session, pressured by U.S. government data that showed a bigger-than-expected rise last week in distillate stocks.

The data eased concern about a tightening distillates market that has sent heating oil futures to record highs this week.

Strength in the euro against the dollar helped prices recover. Oil and the U.S. currency have become closely intertwined in recent months as investors have turned to oil as a hedge against the falling dollar.

But strong emerging market demand and supply constraints are the main forces behind oil doubling in price in the past year.

The commodities rally is generally based on a lack of supply and increasing demand from developing countries, said Angus McPhail, of UK investment manager Alliance Trust.