* Dollar weakens; API says U.S. fuel inventories fell
* China rate hike impact on oil market limited - analyst
* Coming Up: U.S. EIA oil inventory report; 1430 GMT
(Updates prices)
By Alex Lawler
LONDON, Oct 20 (Reuters) - Oil rose to around $80 a barrel
on Wednesday, supported by a weaker dollar, signs that U.S. fuel
stockpiles are falling and as investors reassessed a surprise
interest rate rise in the world's second-largest consumer China.
The U.S. government's Energy Information Administration
reports oil inventory figures on Wednesday. [] On Tuesday,
industry group the American Petroleum Institute (API) said fuel
stocks fell last week.
U.S. crude for November <CLc1>, which expires later on
Wednesday, gained 41 cents to $79.90 a barrel by 1310 GMT. Brent
crude <LCOc1> rose by 80 cents to $81.90.
Oil in New York on Tuesday fell more than 4 percent, the
biggest one-day percentage decline since February, after China
surprised markets by raising interest rates for the first time
in nearly three years.
"This will not derail the Chinese economy, so the reaction
was a bit overdone," said Carsten Fritsch, commodities analyst
at Commerzbank in Frankfurt. "Commodity prices and also equity
markets have rebounded today."
Other commodities such as gold and copper were up, while
European stocks gave up most of an earlier gain. The rate rise
prompted losses across commodities, sending down the
Reuters-Jefferies CRB index <.CRB> by almost 2 percent on
Tuesday.
"The actual impact of this rate hike might be limited on the
overall growth story in China. I don't think fundamentally it
changes the demand story," said Yingxi Yu, a Singapore-based
commodities analyst with Barclays Capital.
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For a graphic on China's inflation and rate rises click:
http://link.reuters.com/rem39p
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WEAK DOLLAR
Oil also gained support from a weak dollar, which dipped
against a basket of currencies. [] A falling dollar makes
oil and other dollar-denominated commodities cheaper for holders
of other currencies.
U.S. crude reached a five-month high above $84 on Oct. 7 as
expectations the Federal Reserve would this year embark on a
second round of expansionary monetary measures to boost growth
weighed on the dollar.
Several Federal Reserve officials indicated on Tuesday that
the central bank will soon offer further monetary stimulus, with
one saying $100 billion a month in bond buying may be
appropriate. [].
China has been the main driver of oil demand growth so far
this year, although it still uses far less than top consumer the
United States. A source said China will raise retail fuel prices
effective Thursday. []
Even so, an inventory overhang in the United States has
limited price gains. U.S. crude inventories rose by a
greater-than-expected 2.3 million barrels last week, the API
said on Tuesday.
But U.S. stocks of distillates, including diesel and heating
oil, fell by 854,000 barrels, while gasoline stocks fell by
83,000 barrels. Refinery utilization rose 0.8 percentage points.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)
