NEW YORK (Reuters) -
Oil prices pulled back sharply from a
record above $135 a barrel on Thursday as dealers took profits
from a dazzling rally and a recovering U.S. dollar dampened
commodities markets.

U.S. crude settled down $2.36 at $130.81 a barrel after
jumping earlier in the session to a record $135.09. London
Brent crude fell $2.19, to $130.51, after touching a peak of

"Some people had set a target of $135 as part of their
investment strategy and once that price was achieved, have
started taking some profits," said Phil Flynn, analyst at
Alaron Trading in Chicago.

Dealers also noted selling across other commodities markets
as the dollar recovered on a drop in U.S. jobless claims.

The pullback came after crude rallied more than a third
since the start of the year, driven by worries about tight
stocks of refined products in the near term and mounting global
demand over the longer term.

"The combination of increasing demand and constricted
supply will continue to keep oil prices strong," Robin
Batchelor, manager of BlackRock's BGF World Energy fund, said
in a research note.

Oil has risen sixfold since 2002, propelled by rising
consumption in China and other developing countries.

Concerns about long-term supply tightness have also
recently pushed prices for future delivery even higher than
prompt contracts. December 2016 U.S. crude reached $145.60 a
barrel, making it the loftiest contract on the futures curve.

Oil prices surged on Wednesday after U.S. weekly data
showed crude stocks declined by 5.4 million barrels. Analysts
had expected an increase.

OPEC Secretary-General Abdullah al-Badri said Thursday the
group can do nothing to lower oil prices, and called the oil
market "crazy."

The United States has repeatedly called on the Organization
of the Petroleum Exporting Countries (OPEC) to boost its output
to try to calm markets, but the group has said no increase is

(Additional reporting by Richard Valdmanis in New York,
Felicia Loo in Singapore, Chikafumi Hodo in Tokyo; Editing by
Marguerita Choy)