By Chris Baldwin

Oil fell from a four-month high on Friday, paring the previous session's 7 percent rise, on a weaker dollar and doubts over the effectiveness of the U.S. Federal Reserve's $1 trillion package to revive the economy.

Oil surged on Thursday to $51.61 a barrel, the highest settlement since November 28, after a U.S. Federal Reserve plan to fight recession and a weakening dollar boosted investor appetite for commodities.

U.S. light crude for April delivery, which expires on Friday, fell 11 cents or 0.21 percent to $51.50 a barrel by 0853 GMT (4:53 a.m. EDT), while the May delivery contract was up 9 cents to $52.13.

London Brent crude rose 8 cents to $50.75.

Oil has had a very good run in the past few sessions and some traders may see that it's a good time to take profit after the surge last night, said Toby Hassall, head of research at Commodities Warrants Australia.

There could also be some uncertainties on the effectiveness of the Fed's plan to revive the economy. It has no doubt given the markets a shot in the arm but there is still unease about the implications of the latest Fed action.

Oil is up 10 percent this week, lifted by a weaker dollar and hopes the Fed's move to buy long-dated treasuries, its first large-scale purchase of government debt since the 1960s, would propel the U.S. economy out of a 14-month recession.

But with crude stockpiles swelling in the United States and immediate energy demand still weak, some analysts cautioned that it may be difficult for oil prices to sustain its recent rally.

The U.S. dollar headed for its biggest weekly fall in 24 years on Friday as investors feared the Fed's plan would cheapen the world's reserve currency.

Analysts said the Fed's radical decision to buy $300 billion of longer-term government debt and vastly expand its balance sheet beyond the current $2 trillion meant more and more of the U.S. greenback would be created, straining demand.

In another sign the U.S. economy is still deep in recession, jobs data on Thursday showed a record high in the number drawing state unemployment benefits.

The International Monetary Fund forecast on Thursday the world economy would contract in 2009 for the first time since World War Two by between 0.5 percent and 1.0 percent.

U.S. bank JP Morgan upped its WTI crude oil price forecast for 2009 to an average of $49.38 a barrel, up some $5 from its previous estimate in December, the bank said in a monthly report.

(Additional reporting by Fayen Wong in Perth, editing by Sue Thomas)