Oil climbs above $80 on faltering dollar

London: Oil rose above $80 per barrel yesterday as the dollar weakened against a basket of other currencies and after an industry report showed US crude oil stocks fell steeply last week.

The dollar has fallen steadily for most of this year and hit a 15-month low this week, helping drive commodities higher as investors have sought hard assets to hedge against the depreciating currency.

Oil is priced in dollars on world markets and energy prices often move in the opposite direction to the US currency.

"The market has picked up as the dollar has retrenched," said Harry Tchilinguirian, oil analyst at BNP Paribas.

"With oil trading [rightfully or wrongfully] inversely with the dollar and positively with equities, buying interest in oil, like other commodities has risen," BNP said in a statement.

US light crude oil futures for December delivery rose more than $1 per barrel to a high of $80.23 before settling back to trade around $80.06 by 1200 GMT.

London Brent crude gained $1.03 to $80.00.

Forecast raised

BNP Paribas raised its average price forecast for US crude in 2010 to $81 a barrel from $78 and also increased its estimate of the average price in the fourth quarter of 2009 to $77 per barrel from $66.

Oil prices were also supported yesterday by weekly data from the American Petroleum Institute (API) on Tuesday, which showed US crude inventories fell much more sharply than expected last week, dropping 4.4 million after storms in the Gulf of Mexico disrupted supplies.

Investors awaited a report from the Energy Information Administration at 1530 GMT, considered the most reliable data on the US oil industry, to confirm the API figures.