LONDON- Oil rose, supported by a weak dollar, strong Chinese manufacturing data and a fall in US crude and winter fuel stocks, easing a surplus that has weighed on the market for months.
The dollar slipped against a basket of major currencies after poor US economic data on Tuesday reinforced expectations the US Federal Reserve would take more action to help the struggling economy.
Commodities and energy prices tend to move inversely to the dollar because they are priced in the US currency on international markets.
The weaker dollar also supported gold, which hit a lifetime high on Wednesday, its 10th record in 12 sessions.
US crude for November rose 30 cents to $US76.48 a barrel by 1252 GMT, approaching a two-week high above $US77 touched earlier this week. ICE Brent for November was up 29 cents to $US79.00.
"It is a dollar story today," Commerzbank head of commodity research Eugen Weinberg said. "The dollar is very, very weak and is helping drive short-term sentiment."
"US oil data is also supportive, and so are the Chinese manufacturing figures," he added.
HSBC's China Purchasing Managers' Index hit a five-month high in September, pointing to renewed, though moderate, momentum in the vast industrial sector that is the backbone of China's economy.
US data
China is the world's second-largest user of oil and its consumption has been supporting energy prices this year despite only sluggish growth in the United States and Europe.
US inventories of distillates, which include heating oil and diesel, dropped 2.8 million barrels in the week to September 24, pulling stocks 3.5 million barrels below year-ago levels, the American Petroleum Institute said on Tuesday.
Crude stocks fell by 2.4 million barrels, much more than the 300,000-barrel decline forecast in a Reuters survey of analysts, but they are still 22 million barrels above year-ago levels.
Inventory data from the US government's Energy Information Administration were due out at 1430 GMT on Wednesday.
Oil prices have remained relatively stable so far this year, trading two-thirds of 2010 between $US70 and $US80 per barrel, a range that oil producers in the Organization of the Petroleum Exporting Countries have said they favour.
OPEC meets in Vienna next month and is expected to keep its oil production targets unchanged.
OPEC crude oil supply has fallen so far this month to the lowest level since November 2009 due to reduced output from Angola and smaller declines in the United Arab Emirates and Iran, a Reuters survey showed on Tuesday.
Iran's OPEC governor expects oil prices to reach $US80 per barrel by the start of winter, assuming there are no major changes in the market, news agency ILNA reported on Wednesday.
"By the beginning of the cold season an increase in the oil price to around $US80 is possible," Mohammad Ali Khatibi was quoted as saying.
The chief economist of the International Energy Agency said on Wednesday oil prices could exceed $US80 if global growth was over 3-3.5 per cent, although sharp rises were not expected this year or next due to excess capacity.
