* Oil prices rise as investors hedge against weaker dollar
* Producers deny report they'd stop pricing oil in dollars
* U.S. EIA raises forecast for 2010 world oil demand
(Adds prices and gasoline demand figures, updates
throughout.)
By Joshua Schneyer
NEW YORK, Oct 6 (Reuters) - Oil prices rose slightly on
Tuesday as investors bought commodities to hedge against a
weaker dollar and the U.S. government forecast an increase in
world oil demand.
The U.S. dollar dropped after Australia's Central Bank
unexpectedly raised interest rates, a move investors took as a
signal world economies may recover soon, boosting fuel demand.
The U.S. dollar also weakened after Britain's Independent
newspaper reported that Gulf Arab states were in secret talks
to abandon the greenback as the currency they use to price
oil.
The world's largest oil-producing states, including Saudi
Arabia and Russia, swiftly denied that report, saying they
expected no broad shift away from dollar pricing. Iran, OPEC's
No. 2 oil producer, moved away from pricing oil in dollars this
year. [] []
Because oil is denominated in dollars for global trading,
it tends to rise when the U.S. currency falls as oil becomes
cheaper for holders of other currencies. A move away from
dollar-based pricing of the world's leading commodity could
further weaken the greenback. <.DXY> []
U.S. crude for November delivery rose 25 cents to trade
for $70.66 a barrel by 1756 GMT. Oil prices earlier rose to a
two-week high of $71.97 a barrel, but pared gains as the dollar
recovered some of its earlier losses in afternoon trade. Brent
crude was up 47 cents at $68.50.
"Iran's success at moving to a euro basis for its oil sales
... sparked reports about a possible broader shift away from
dollar-based pricing," said Tim Evans, energy analyst at Citi
Futures Perspective in New York.
"But it looks as though other major oil exporters are
sticking with the U.S. dollar, at least for now."
Stock markets also rose Tuesday, helping push oil higher.
[]
"It's all about the dollar for commodities and it's all
about the dollar for equities," said Chris Jarvis, senior
analyst at Caprock Risk Management in New Hampshire.
The U.S. Energy Information Administration raised its
outlook Tuesday for world oil demand during the fourth quarter
and for 2010, citing expectations of economic recovery in
Asia.
EIA raised its global oil demand estimate by 170,000
barrels a day for the fourth quarter of 2009, and said it
expected consumption to rise 1.1 million barrels a day next
year, versus earlier expectations of a 910,00 bpd rise.
[]
U.S. retail gasoline demand last week jumped 7 percent from
the same period last year and rose 0.6 percent from the
previous week, according to a MasterCard SpendingPulse report
released on Tuesday. []
Demand recovery optimism is helping boost oil prices, but
most analysts still expect data to show that U.S. crude oil
inventories rose last week.
EIA data will likely show that U.S. crude stocks grew 2.2
million barrels in the week to Oct. 2, as refinery utilization
and feedstock usage dipped on poor refining margins, according
to the average estimate of 14 analysts polled by Reuters.
[]
"Weak demand data is stopping prices rallying and maybe
fund support is stopping it sinking," said Christopher Bellew,
oil broker at Bache Commodities in London.
The American Petroleum Institute will release its inventory
report on Tuesday at 2030 GMT, while the EIA will publish its
supply data on Wednesday.
(Additional reporting Gene Ramos in New York and Christopher
Johnson and Joe Brock in London; Editing by David Gregorio)
