UPDATE 12-Oil up 7 pct on weak dollar, U.S. Fed rate cut

                                
 * U.S. Fed cuts interest rate half a percentage point
                                
 * Dollar slides, world stock markets gain
                                
 * U.S. crude inventories rise, gasoline down
 (Adds post-settlement price action in paragraph four, updates
stock market action)
                                
 By Chris Baldwin
                                
 NEW YORK, Oct 29 (Reuters) - Oil jumped more than 7 percent
percent on Wednesday as the dollar fell after the Federal
Reserve cut U.S. interest rates.
                                
 The Fed cut interest rates half a percentage point, taking
its target for overnight bank lending to 1 percent, the lowest
since 2004.
                                
 European and Asian stock markets ended higher while U.S.
stocks gyrated in highly volatile trade after the rate cut,
amid signs the myriad central bank and government efforts to
shore up credit markets were starting to work. [ID:nN29495069]
                                
 U.S. crude <CLc1> rose $4.77, or 7.6 percent, at $67.50 a
barrel, then rose further to hit $68.28 in post-settlement
trade.
                                
 London Brent crude <LCOc1> settled up $5.18 a barrel at
$65.47.
                                
 "I don't think it has a direct impact on oil demand, I
don't expect it to put more cars on the road or make the coming
winter colder so I'm not really looking for a direct impact on
petroleum use," said Tim Evans, energy analyst for Citi
Futures.
                                
 "What it may do is perhaps weaken the US dollar, perhaps
support the stock market, and those would be supportive factors
for oil prices."
                                
 The global financial crisis has hit oil demand. Crude
prices have tumbled from record highs over $147 a barrel struck
in July after investors poured cash into oil and other
commodities as a hedge against inflation and the slumping
greenback.
                                
 The dollar extended losses against the euro on Wednesday
after U.S. stocks rallied following the Fed's rate cut.
[nN29496286]
                                
 U.S. INVENTORIES
                                
 U.S. crude inventories last week rose 500,000 barrels,
according to the U.S. Energy Information Administration, less
than the 1.4-million-barrel gain analysts had expected.
[EIA/S]
                                
 Distillate stocks rose 2.3 million barrels -- above the
800,000-barrel increase forecast by analysts, while gasoline
stocks fell by 1.5 million barrels compared with analysts
expectations of a 1.2-million-barrel build.
                                
 Gasoline demand continued to fall, down 3.4 percent over
the past four weeks versus the year-ago period, while total
product demand was down 7.8 percent for the same period.
                                
 Some OPEC members have said the producer group could cut
oil production again to help support prices, after agreeing to
a 1.5-million-barrel-per-day (bpd) reduction last week.
                                
 "If there is a surplus in the market, if nobody needs the
production, then a decision might be taken," Kuwait Oil
Minister Mohammad al-Olaim told reporters. [ID:nLT270624]
                                
 Venezuela would back an additional OPEC production cut,
possibly of 1 million barrels per day, if it were necessary to
stabilize crude oil prices, President Hugo Chavez said on
Tuesday. [ID:nN28423327]
 (Additional reporting by Jane Merriman in London and Maryelle
Demongeot in Singapore; Editing by David Gregorio)