By Fayen Wong

Oil fell from a near 4-month high to around $51 on Friday, paring the previous session's 7 percent gain, on doubts over the effectiveness of the U.S. Federal Reserve's $1 trillion package to revive the economy.

Oil jumped on Thursday to $51.61 a barrel, the highest settlement since November 28, after the Fed's plan to fight recession and a weak dollar boosted the appeal of commodities to investors.

U.S. light crude for April delivery, which expires on Friday, fell 86 cents or 1.7 percent to $50.75 a barrel by 12:03 a.m. EDT, while the May delivery contract fell 67 cents to $51.37. London Brent crude fell 42 cents to $50.25.

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.

Investors are worried over the weakening dollar and prospects of surging inflation once the economy starts recovering, analysts say.

Oil prices have risen 10 percent this week, largely boosted by the weak dollar and hopes the Fed's move to buy long-dated treasuries, its first large-scale purchase of government debt since the early 1960s, would help lift the battered 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.

Unless the U.S. dollar continues to weaken, oil may have to retreat below $50 a barrel, Hassall said.

The U.S. dollar was heading for its biggest weekly fall in 24 years on Friday as investors feared the Federal Reserve's plans to buy government debt would cheapen the world's reserve currency.

Commodity prices rallied this week, with the Reuters-Jefferies CRB index, a global commodities benchmark, touching a five-week high Thursday, as the softer dollar made them cheaper for overseas buyers, while others looked for a hedge against potential inflation.

In a further sign that the U.S. economy was still mired in a deep recession, U.S. jobs data showed a record high in the number drawing state unemployment benefits.

The International Monetary Fund on Thursday forecast the world economy will 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.

(Editing by Ben Tan)