* U.S. gasoline demand up, stocks fall
* Crude, middle distillate inventories rose
* U.N-Iran nuclear talks on Thursday
(Recasts, updates prices, market activity; new byline,
dateline, previously LONDON)
By Edward McAllister
NEW YORK, Sept 30 (Reuters) - Oil surged over 4 percent
toward $70 a barrel on Wednesday, buoyed by a drop in U.S.
gasoline inventories and a weak dollar.
U.S. government weekly oil data showed gasoline inventories
dropped 1.6 million barrels, in line with separate figures from
industry group American Petroleum Institute but contrary to
forecasts by analysts who had expected an increase.
Gasoline demand over the past four weeks was up by more
than 5 percent. [] []
U.S. crude futures <CLc1> were up $2.87 to $69.58 a barrel
by 1:08 EDT (1708 GMT). London Brent crude <LCOc1> gained $2.62
to $68.11 a barrel.
"The real surprise was the draw on gasoline stocks. It's
certainly a positive sign for gasoline prices and implied
gasoline demand is also up," said Addison Armstrong, director
of market research with Tradition Energy in Connecticut.
He and other analysts said inventories of crude oil and
middle distillates, such as heating oil and diesel, rose and
demand for such oil products overall still remained weak.
Crude oil inventories increased by 2.8 million barrels last
week, surpassing analysts' forecast for a 600,000 barrel rise.
The increase in middle distillate inventories was smaller than
expected, but demand over past four weeks was more than 9
percent lower than a year earlier.
"The report is actually mixed," Olivier Jakob with
Swiss-based Petromatrix said. "Overall inventories increased
and keep building up."
Given that overall oil demand remained slack, the U.S.
dollar and equities may come back to influence the oil market,
Jakob said.
U.S. equities moved into positive territory in early
afternoon, bouncing back from news of a surprise fall in
business activity in the U.S. Midwest, including Chicago.
Further support came from a weak dollar, which makes crude
more affordable for buyers using other currencies.
Political tensions related to Iran, OPEC's No. 2 producer,
added support, analysts said, ahead of a meeting between
diplomats from the five permanent U.N. Security Council members
as well as Germany and Iran's nuclear negotiator
[].
(Additional reporting by Ikuko Kurahone, Christopher
Johnson; Editing by David Gregorio)
