Oil above $50

Crude prices rocket higher on government program to buy up its own debt. Oil touches $50 for first time since January

LONDON (Reuters) -- Oil rallied to $50 a barrel Thursday after a move by the Federal Reserve to buy government bonds on a large scale hit the dollar and revived hopes the U.S. economy could soon begin its recovery.

The Fed announced Wednesday it would pump another $1 trillion into the U.S. economy by buying long-term government debt for the first time since the 1960s and by expanding purchases of mortgage bonds.

"It's a combination of a drop in the U.S. dollar and the Fed's move that has pushed up oil prices," said David Moore, a commodity strategist at the Commonwealth Bank of Australia.

"But I suspect more of it is probably on hopes that U.S. policy stimulus would help turn the economy around, or at least stabilize it."

U.S. crude for April rose $1.97 to $50.11 a barrel. It was the first time since Jan. 6 that oil touched the $50 mark.

"Whether Wednesday's advance now extends into the balance of the week remains to be seen," analyst Edward Meir of MF Global said. "We have our doubts, as we are once again approaching key resistance at $50."

The dollar was steady against a basket of currencies Thursday, after posting its biggest daily fall since 1985. A weak dollar can boost investor demand for oil and other commodities priced in the U.S. currency.

Besides technical resistance, falling demand could also limit oil's gains in the near term.

On Wednesday, oil fell after data showed U.S. crude inventories ballooned to the highest in nearly two years and the World Bank cut its 2009 forecast for China's economic growth.

In its weekly report, the U.S. Energy Information Administration said crude oil stocks rose 2 million barrels to 353.3 million last week -- double the increase forecast by analysts.

Slumping demand and rising inventories have helped drag oil down from a record high near $150 reached last summer as the economic crisis hit consumption across the globe.

Analysts say oil, which sank below $33 in December, has stabilized around $40 to $50 due to OPEC supply curbs of 4.2 million barrels per day, but the grim economic outlook is standing in the way of a further advance.

The Organization of the Petroleum Exporting Countries pledged to comply more strictly with its supply curbs at a meeting on Sunday. It meets again to set oil output policy on May 28.

Saudi Arabian Oil Minister Ali al-Naimi, the group's most influential voice, said on Wednesday he believed OPEC had managed to put a floor under the market.

"I think OPEC has succeeded in stabilizing prices," he said. "The next thing is to hope for a gradual improvement in prices over time.".