* Dollar weakness on expected Fed easing, supports oil
* Libya says oil could get closer to $100 by end of 2010
* Coming up: U.S. EIA oil data, 10:30 a.m. EDT Wednesday
(Updates with API data, paragraphs 5-8)
By Robert Gibbons
NEW YORK, Nov 2 (Reuters) - Oil rose to a six-month peak on
Tuesday as the dollar fell ahead of an expected decision by the
Federal Reserve to inject more money into the economy and more
OPEC producers signaled a tolerance for higher prices.
The U.S. central bank is expected to announce a second
round of quantitative easing totaling around $500 billion of
government debt purchases over several months at the end of its
two-day policy meeting on Wednesday.
U.S. crude for December delivery <CLc1> rose 95 cents, or
1.15 percent, to settle at $83.90 a barrel, the highest close
since May 3.
ICE December Brent crude <LCOc1> rose 79 cents to settle at
$85.41.
Late on Tuesday, the industry group American Petroleum
Institute's oil inventory report said U.S. crude stocks fell
unexpectedly, by 4.1 million barrels, last week. []
Gasoline and distillate stockpiles also fell much more than
the consensus forecast.
U.S. crude oil prices extended gains in post-settlement
trading after the API report, pushing above $84 a barrel.
Ahead of the API data, a Reuters analyst survey had yielded
a forecast for crude supplies to be higher. []
The U.S. Energy Information Administration's inventory
report is due on Wednesday morning.
The U.S. dollar weakened broadly and Wall Street rallied on
Tuesday, both factors that have helped propel oil and commodity
prices higher this year, as investors awaited the expected
Federal Reserve attempts to support a faltering recovery and
the results of Tuesday's U.S. mid-term elections.
"The dollar is being sold and equities are higher, lifting
oil, but there is some caution ahead of the elections and the
Fed announcement," said Chris Dillman, analyst at Tradition
Energy in Stamford, Connecticut.
Crude spiked in reaction to the top official for OPEC
member Libya telling Reuters he thought oil prices would get
closer to $100 by year's end. []
Shokri Ghanem, chairman of Libya's National Oil Corp, said
producers' income for dollar-denominated oil had declined while
the cost of food and other commodities had risen due to the
dollar's slump.
U.S. front-month crude oil prices have risen $8.73, or 11.6
percent since Aug. 27, when Federal Reserve Chairman Ben
Bernanke signaled the likelihood of another round of
quantitative easing, according to Reuters data.
The U.S. dollar's value against a basket of currencies
<.DXY> fell 6.41 percent in that period.
The Libyan comments came a day after Saudi Oil Minister Ali
al-Naimi said oil prices in a $70-$90 range were comfortable
for consumers, signaling a higher acceptable range from the
$70-$80 range previously deemed comfortable. []
Qatar's oil minister also said $70-$90 per barrel would be
reasonable for consumers and producers. []
The dollar fell on Tuesday after a surprise interest rate
hike from Australia and positive euro zone economic news, but
analysts warned of a possible rebound if the Federal Reserve
moves disappoint markets. []
The weak dollar lifts oil and other dollar-denominated
commodities as it lowers the value of currency paid to oil
producers and it attracts investment seeking better returns
than found in other markets.
SELL THE NEWS
Several brokers and analysts also voiced caution about oil
prices ahead of the Federal Reserve's move, with some
cautioning there might be a sell-the-news reaction if the Fed's
actions are not as substantive as expected.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic of returns from a range of assets since the Fed
began hinting it would launch a new round of QE:
http://link.reuters.com/kyw48p
Graphic of commodities so far this year:
http://link.reuters.com/kew48n
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
A "sell-the-news" reaction to the Fed's policy announcement
is "a distinct possibility," Tim Evans, analyst at Citi Futures
Perspective in New York, said in a research note.
(Additional reporting by Gene Ramos in New York and Christopher
Johnson in London; Editing by David Gregorio)
