By Barani Krishnan
NEW YORK (Reuters) - Oil fell on Friday as the dollar surged on bets of a near-term rate hike from strong U.S. jobs growth, offsetting an early run up in crude prices on worries about Libyan and Iraq supplies.
A stronger dollar makes oil, quoted and traded in the greenback, costlier for holders of the euro and other currencies. The dollar rocketed to 11-/12 year highs against a basket of currencies after the U.S. government reported the U.S. jobless rate fell to 6-1/2 year lows.
Many U.S. Federal Reserve officials consider that to be full employment, and the central bank could decide on an interest rate hike in June.
Benchmark Brent oil was down 44 cents at $60.04 a barrel by 11:00 a.m. EST (1600 GMT). U.S. light crude fell 71 cents at $50.05.
"The strong jobs numbers are a bit of a double-edged sword for oil, as they denote a better economy while raising the spectre of the first U.S. rate hike in years," said Phil Flynn, analyst at the Price Futures Group in Chicago.
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"That said, the bottom side in oil is still being protected by the situation in Libya and Iraq, and upcoming oil rig data," Flynn added.
Oil services company Baker Hughes will issue at 1:00 p.m. EST (1800 GMT) a weekly survey of the number of U.S. rigs drilling for crude. The data is an indicator used by some market players and investors on whether shale producers are cutting output after flooding the market with supplies that caused a 60 percent drop between June and January.
Bakers Hughes data for last week showed U.S. oil rigs fell by just 33 to 986, the smallest drop since the beginning of the year. [RIG/U]
Brent reached above $61 and U.S. crude over $51 a barrel earlier Friday after fighting escalated in northeast Iraq, where Islamic State militants set ablaze oilfields to deter the advance of Shi'ite militiamen and Iraqi soldiers.
Libya has, meanwhile, closed 11 oilfields on worsening security.
While the Middle East and North African situations supported prices, traders were also wary of the West reaching a nuclear deal with Iran that would lift sanctions allowing it to export more into a market already flooded with U.S. shale oil.
Iran's semi-official Mehr news agency on Friday quoted a national oil firm official affirming Tehran would increase crude exports if sanctions were lifted.
(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Dale Hudson, William Hardy and W Simon)