Oil rallies above $124 on U.S. draw, dollar

NEW YORK (Reuters) - Oil prices rallied 3 percent on Wednesday as U.S. crude oil inventories fell for the first time in seven weeks and the dollar weakened further, fueling investor appetite for riskier assets.

The oil rally extended gains for a second day and both Brent and U.S. crude prices were racing back up toward 2011 highs.

ICE Brent crude for June delivery rose $2.74 to $124.07 a barrel by 12:10 p.m. EDT (1610 GMT) after surging to an intraday high of $124.23. Brent hit a 32-month high above $127 a barrel on April 11, but concerns about high prices stifling fuel demand had since cut them back.

U.S. June crude gained $3.25 to 111.53, just below its session high of $111.66.

U.S. crude inventories fell 2.32 million barrels last week, bucking average analyst forecasts in a Reuters poll for a 1.1 million barrel increase. It was the first drawdown since the week to February 25

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