By Barani Krishnan
NEW YORK (Reuters) - Crude prices fell on Friday as a rallying dollar and fears of a rate hike due to strong U.S. jobs growth suppressed the market, diverting attention from a near four-year low in the number of rigs drilling for oil in the United States.
Worries about the security of Libyan and Iraq crude supplies, which had put a floor beneath the market in the earlier hours of trade, also took a backseat.
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 <.DXY> 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
"Today's focus is on the absolute strength of the dollar and what that could mean for near-term interest rates in the United States," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. "The rig count data hasn't mattered as much, frankly."
The number of rigs drilling for oil in the United States fell by 64 this week to 922, the smallest number of rigs in operation since April 2011, Baker Hughes said in its weekly survey.
It was a sign U.S. shale oil producers, who had flooded the market with crude supplies, had again stepped up on winding down output after last week's rig drop of 33, which was the least since the start of 2015. [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, W Simon and Chizu Nomiyama)
