Oil rises as Yemen unrest escalates, dollar falls

NEW YORK (Reuters) - Oil rose on Tuesday, reversing earlier losses, as unrest in Yemen threatened to further crimp energy exports from the Gulf region and the U.S. dollar weakened to a 15-month low on recovering risk appetite among investors.

French oil giant Total warned customers for liquefied natural gas from its Yemen LNG project that shipments from the exporting country could face cuts, although they remain normal for now, due to escalating political unrest.

Thousands of Yemeni protesters took to the streets on Tuesday, clamoring for President Ali Abdullah Saleh to step down. Several top officials have already abandoned his regime.

Yemen produces around 290,000 barrels a day of oil and exports LNG.

"The situation in the Middle East is still very bullish for oil," said Phil Flynn, analyst at PFGBEST Research in Chicago. "The unrest spreading (there) on top of the conflict in Libya is still the market focus."

U.S. crude futures rose 94 cents a barrel to $103.27 as of 10:59 a.m. EDT, while Brent crude rose 30 cents to $115.26.

U.S. crude had earlier fallen as low as $101.43 a barrel, after Japan said it would release oil from its strategic crude stockpiles following the recent earthquake and tsunami, followed by radiation leaks from idled nuclear power reactors.

OPEC believes the oil price will approach $120 a barrel and remain in that range, an "acceptable" level that would not hinder global growth, Iraq's oil minister Abdul-Kareem Luaibi said on Tuesday.

The U.S. dollar slumped to a 15-month low against other major currencies as a resumption in risk appetite spurred demand for currencies and commodities that could offer higher returns.

(Additional reporting by Nia Williams in London, Alejandro Barbajosa in Singapore, Gene Ramos and Robert Gibbons in New York; editing by Jim Marshall)

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