Oil rises above $80 on crude stocks, dollar

By Joe Brock

LONDON (Reuters) - Oil rose above $80 a barrel on Wednesday, extending the previous session's near 2 percent gain, following a U.S. industry report showing an unexpected fall in crude stocks and supported by a weaker dollar.

The U.S. dollar fell against a basket of currencies on Wednesday, helping to send gold prices to record highs and lifting oil. A weaker dollar makes commodities like oil cheaper for those holding other currencies.

U.S. crude for December rose 48 cents to $80.08 a barrel by 1123 GMT, after settling up $1.47 on Tuesday. London Brent crude added 31 cent to $78.42 a barrel.

"I think a combination of the weaker dollar and inventories is lifting oil," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

"After yesterday's data the market may be anticipating a similar result in today's inventory numbers, which is another reason for oil rising," Fritsch added.

Industry group American Petroleum Institute said late on Tuesday that U.S. commercial crude oil stocks fell 3.3 million barrels as imports dropped in the week to Oct. 30, versus expectations for a 1.4 million-barrel rise.

The data lifted optimism that the pace of oil demand recovery was picking up in the world's largest energy user, helping to send oil prices higher.

The API did say however that gasoline stocks rose by 501,000 barrels last week against forecasts for a 300,000-barrel increase, while distillate supplies increased by 1.8 million barrels versus predictions for a 1 million-barrel decline.