Brent rises near $123 on US gasoline

* Brent on track for 14 pct quarterly gain; U.S. crude up 4 pct on qtr * Investors bet on tighter U.S. gasoline market in summer * Oil tumbles in past two sessions on strategic stocks release talks (Updates prices) By Florence Tan SINGAPORE, March 30 (Reuters) - Brent crude rose towards $123 on Friday as investors bet on a tighter gasoline market in the world's largest oil consumer during the peak summer driving season and on persistent worries of a supply disruption in the Middle East. Traders took the opportunity to cover short positions and bought on price dips after oil tumbled in the past two sessions on growing talk of a release of strategic petroleum reserves by some consumer nations, and a surge in U.S. crude inventories. Front-month Brent crude rose 39 cents to $122.78 a barrel by 0620 GMT, recovering from its sharpest daily fall in more than three weeks. U.S. crude futures were up 58 cents at $103.36 after posting their biggest two-day slide since mid-December. The price slump widened Brent's premium to U.S. crude CL-LCO1=R to $19.42 after settling at $19.61 a barrel on Thursday. Despite the losses, Brent crude futures are on track to post a gain of 14 percent for the quarter, with U.S. crude heading for a rise of 4 percent. "Oil is rebounding from yesterday's decline as traders are buying on dips," said Ryoma Furumi, a commodity sales manager at Newedge Japan. "Geopolitical tensions could push Brent up further while the Brent-WTI spread may narrow in the coming months if the bullish gasoline sentiment continues." Traders are bullish on gasoline as the shutdown of several refineries could reduce supply of the motor fuel in the U.S. East Coast, Furumi said. Front-month April RBOB gasoline rose 0.51 cent to settle at $3.4006 a gallon on Thursday. Nearly 430,000 barrels per day of refining capacity were idled in the United States by the end of 2011. MIDEAST SUPPLY Tough sanctions by the West targeting Iran's nuclear programme have curbed oil exports from the Islamic Republic and supply could tighten further from July 1 when a ban on European insurance cover for Iranian oil takes effect. The tension in the Middle East and the peak gasoline demand season in the United States could push U.S. crude futures as high as $120 in the second quarter, said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments. The surge in oil prices has prompted the United States, with Britain and France, to consider a release from emergency stockpiles to cut fuel costs. Other countries, including South Korea and Japan, may join the plan. Consumer nations may seek reassurance from Saudi Arabia that it will not cut oil production and neutralise the impact on oil prices if they tap emergency reserves, industry and diplomatic sources said. U.S. President Barack Obama is likely to determine by Friday that there will be enough oil in the world market to allow countries to cut imports from Iran, taking another step toward sanctioning those nations that do not, analysts and a congressional aide said.