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UPDATE 10-Oil extends gains to new 3-month high on weak dollar

Published 08/03/2010, 04:20 PM
Updated 08/03/2010, 04:24 PM
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* Dollar slips against basket of currencies

* Brent regains premium to U.S. crude on N.Sea field work

* U.S. oil data expected to show crude stock drop

* Coming Up: US API weekly inventory report, 4:30 p.m. EDT (Updates prices at settlement, adds trading volume)

By Edward McAllister

NEW YORK, Aug 3 (Reuters) - Oil prices rose for a fourth day on Tuesday, setting a fresh three-month highs above $82 per barrel as the dollar fell and dealers anticipated a decline in U.S. crude oil inventories after last week's big build.

Weekly crude oil stocks probably fell by 1.4 million barrels last week as imports slipped and after Gulf of Mexico production was interrupted briefly by Tropical Storm Bonnie, a Reuters survey showed. [EIA/S] American Petroleum Institute inventory data is due at 4.30 p.m. EDT.

U.S. September crude futures rose $1.21 to settle at $82.55. The last time U.S. crude traded above $82 was on May 5. In London, ICE Brent rose $1.86 to $82.68. Volume was light, with U.S. NYMEX futures trading just over 475,000 lots, below the 30-day average of around 535,000 lots.

"U.S. inventory data is likely to be supportive as a big decline in U.S. crude oil stocks is on the cards," said Carsten Fritsch, commodities analyst at Commerzbank.

North Sea Brent crude oil futures rose above U.S. crude for the first time since mid June as planned summer maintenance reduced supplies from British and Norwegian oil fields. The Forties North Sea crude blend, which tends to set the price of dated Brent, drew no offers or bids on Tuesday for the first time in months due to tight supplies, traders said.

Investors also focused on the dollar this week following a paper last week from St. Louis Fed President James Bullard talking up the risk of deflation. The dollar tumbled to multimonth lows against the euro on Tuesday on fears economic recovery in Europe and Asia will outpace the U.S.

"Crude was up on the weak dollar and Brent was higher on maintenance, helping lead the complex higher," said Andrew Lebow, broker at MF Global in New York.

U.S. crude futures have convincingly broken out and above the $70-$80 a barrel trading range this week, which it had been stuck in for most of the past three months.

Oil largely shrugged off downbeat economic data showing that U.S. consumer spending and incomes were flat in June and the index for pending sales of previously owned homes fell to a record low, which pulled equities lower.

And although neither Israel nor Lebanon have big oil deposits, traders said prices could gain support from a rare cross-border skirmish between Israeli and Lebanese troops on Tuesday, the most serious violence along the frontier since a 2006 war that had also elevated oil prices.

SUPPLIES AND HURRICANES

This week's inventory reports are also expected to show supplies of distillates, including diesel, to have increased 1.2 million barrels, while gasoline stocks were expected to have fallen 400,000 barrels, ending five weeks of gains.

The anticipated drop in U.S. crude stockpiles would follow a jump of 7.3 million barrels to 360.8 million barrels in the week to July 23, the biggest surge since 2008, according to last week's EIA report. Inventories last week were also expected to have dropped because of Bonnie-related disruptions to shipping and production.

Tropical Depression 4 turned into Tropical Storm Colin in the middle of the Atlantic Ocean on Tuesday, the U.S. National Hurricane Center said, but it was not expected to pose a threat to the oil-rich Gulf of Mexico. (Additional reporting by Robert Gibbons and Selam Gebrekidan in New York, Christopher Johnson in London and Alejandro Barbajosa in Singapore; Editing by Marguerita Choy)

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