CORRECTED-UPDATE 4-Oil bounces as dollar weakens

Wed Nov 14, 2012 9:54pm IST

Inside the Peshawar school

Inside the Peshawar school

The aftermath inside the Pakistan school where at least 132 students and nine staff members were killed by Taliban gunmen.  Pictures 

(Corrects from FOMC meeting to FOMC minutes in first paragraph and bullet points)

* U.S. crude inventories seen higher -

* Israeli airstrike highlights geopolitical risks

* US retail sales slip

* Coming Up: FOMC minutes

By Simon Falush

LONDON, Nov 14 (Reuters) - Brent oil gained on Wednesday after two days in retreat, supported by a retreat in the dollar against the euro ahead of a re lease of minutes by th e U.S. Federal Open Market Committee.

The greenback was pressured on growing signs that the Federal Reserve was likely to adopt an ultra-loose monetary stance in coming months.

Influential Fed Vice Chair Janet Yellen said on Tuesday that U.S. interest rates may need to stay near zero until early 2016 to forcefully lift employment.

Brent crude gained 56 cents to $108.82 a barrel by 1433 GMT, after ending 81 cents lower on Tuesday. U.S. oil gained 21 cents to $85.59.

"It's mostly the dollar's weakness, and people are squaring positions ahead of the FOMC ...," said Michael Hewson, analyst at CMC markets.

The dollar fell against the euro, making oil, priced in the U.S. currency, more affordable to holders of the single currency.

The euro was supported on signs Greece would secure funding from international lenders for the rest of 2012, while Italy's borrowing costs fell to a two year low.

Geopolitical tensions also supported prices. Hamas's military chief was killed when his car was hit by an Israeli airstrike on Wednesday, the Palestinian Islamist group said, with multiple Israeli attacks rocking the Gaza Strip.

However economic worries prevented more strength.

A wave of strikes across Europe to protest against spending cuts and tax hikes kept the focus on the region's debt crisis.

And U.S. retail sales fell in October for the first time in three months as superstorm Sandy slammed the brakes on automobile purchases, suggesting a loss of momentum in spending early in the fourth quarter.

Oil fell on Tuesday after the International Energy Agency cut estimates for global oil demand for the fourth quarter by around 300,000 bpd from last month's report in the wake of Hurricane Sandy and as Iran's production increased.

Oil and broader financial markets have remained under pressure due to a U.S. fiscal policy standoff and uncertainty over the euro zone's debt problems.

U.S. lawmakers gathered in Washington on Tuesday to start talks on a deal to tackle the country's finances while Greece's international lenders gave the country more time to fix its budget, though they did not disburse the aid it had hoped to refinance its debt.

Investors were awaiting inventory data to give further insight on the demand/supply balance.

Crude oil inventories rose last week as big East Coast refineries were yet to resume normal operations after disruptions caused by Hurricane Sandy, a Reuters poll of analysts showed.

Crude inventories were seen up 1.9 million barrels in the weekly data from the federal Energy Information Administration, delayed by a day due to the Veterans Day holiday. (Additional reporting by Manash Goswami in Singapore; Editing by William Hardy and Anthony Barker)

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