Brent climbs towards $55 on weaker dollar, supply concerns limit gains

* Kuwait says OPEC must keep output steady

* U.S. oil inventory highest in 80 years

* Iraq's southern crude oil export rate up in March

By Jessica Jaganathan

SINGAPORE, March 20(Reuters) - Brent prices rebounded towards $55 a barrel on Friday as the dollar weakened, but gains were limited by supply concerns after Kuwait said OPEC had no choice but to maintain output levels.

High inventory in the United States, the world's largest oil consumer, also dragged on prices.

Brent crude for May delivery had risen 16 cents to $54.59 a barrel by 0220 GMT. The contract is flat for the week, after falling in the two previous weeks.

U.S. crude for April delivery fell 18 cents to $43.78 a barrel, headed for its fifth weekly loss.

"There appears to be a little bit of let up in the U.S. dollar in the Asian trading period, so crude (prices) might be coming off those lows," said Ben Le Brun, market analyst at OptionsXpress in Sydney.

A weaker dollar typically supports prices for commodities denominated in the greenback, making them cheaper for holders of other currencies.

But oil price gains have been limited by supply concerns, analysts said.

"The U.S. crude inventory numbers have been climbing for the last 10 straight weeks, sitting at their highest levels in 80 years. So that's a further supply side concern on top of news coming out of Kuwait," Le Brun said.

"There doesn't seem to be any sign of OPEC doing anything to turn the taps off so it makes it hard to predict a floor (for oil prices)."

OPEC has no choice but to keep its market share and shun oil output cuts, Kuwait's oil minister said on Thursday, reiterating the view from the emirate that the group will hold its course when it meets next in June.

Many OPEC oil ministers, including Saudi Arabia's Ali al-Naimi, have defended the group's November decision not to cut production but instead defend market share and curtail the output of more expensive producers such as the United States.

Also weighing on prices, Iraq's southern oil exports have risen in March as poor weather that delayed cargoes in February cleared, putting OPEC's second-largest producer back within sight of record shipments.

Six world powers are unlikely to reach a framework agreement with Iran on its nuclear work in the coming days as the sides are still far apart on key issues, a senior European negotiator said on Thursday, blaming Tehran for failing to compromise.

They are seeking a comprehensive agreement to curb Iran's most sensitive nuclear activities for at least 10 years in exchange for a gradual end to sanctions. (Editing by Joseph Radford)