* U.S. crude stocks rise less than expected
* Oil lifted by weaker dollar, rally in U.S. equities
* Coming up: US jobless claims, 8:30 a.m. EDT Thursday
(Recasts, updates prices and market activity, changes
byline, dateline, previously LONDON)
By Gene Ramos
NEW YORK, Oct 20 (Reuters) - Oil rebounded nearly 3 percent
on Wednesday as a weaker dollar, stronger equities and a
smaller-than-expected rise in U.S. crude stockpiles improved
investors' risk appetite.
The gains reversed the previous session's heavy losses, the
worst in more than eight months, as investors reassessed
China's interest rate increase, and deemed it would do little
to curb that country's strong demand for oil.
Oil gained in tandem with metals and grains as the dollar
index <.DXY> slumped 1.3 percent, completely reversing
Tuesday's China-inspired gains as a report putting a $500
billion tag on the U.S. Federal Reserve's next round of
quantitative easing extended earlier overnight losses. []
U.S. crude for November delivery <CLc1>, which expires at
the close, gained $2.47 at $81.96 a barrel by 1:25 p.m. EDT
(1725 GMT). The December contract <CLZ0> traded briskly, rising
$2.34 to $82.50.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on U.S. inventories: http://link.reuters.com/gug49p
EIA status report: []
[]
Tuesday's API report: []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Trading volume was subdued for a second day and was near
540,000 lots, well below the 30-day average of 768,000.
ICE December Brent crude <LCOc1> rose $2.36 to $83.46.
U.S. equities rose more than 1 percent on a stronger
quarterly earnings, an upbeat outlook from the industrial
sector
and the weaker dollar. Oil investors view higher equities as a
barometer for future oil demand. []
Weekly inventory data also lent fundamental support. U.S.
stockpiles rose by only 670,0000 barrels last week, well below
analysts' forecast and short of previously reported industry
data, the data showed. []
"The larger-than-expected draws in crude and distillates
are supportive," said Andy Lebow, broker at MF Global in New
York.
While distillate stocks were also bullish, falling more
than expected, gasoline inventories surprised analysts with 1.2
million-barrel rise, weighing on the motor fuel market.
U.S. gasoline for November delivery <RBX0> was at $2.0821 a
gallon, up 3.38 cents, or 1.65 percent, lagging behind the
gains in crude and heating oil
DOLLAR WEAKNESS, WALL STREET STRENGTH
While U.S. government inventory data was modestly
supportive, the dollar's weakness -- a reversal of Tuesday's
sharp rise -- and strength on Wall Street provided greater
guidance for oil and other commodity investors.
By midday, the Reuters-Jefferies CRB index <.CRB>, a global
commodities benchmark, gained 1.65 percent. On Tuesday, it fell
almost 2 percent, its biggest one-day loss in 3-1/2 months.
The greenback weakened further against the euro and the yen
after Medley Global Advisors, an influential consultancy,
reported that the Federal Reserve plans to buy $500 billion
worth of U.S. Treasuries over the next six months.
[] []
The report reinforced expectations that the Fed was going
into an asset-buying scheme to speed up the slow U.S. economic
recovery. For oil investors, this signals better oil demand
going forward.
U.S. crude reached a five-month high above $84 on Oct. 7 as
expectations the Federal Reserve this year would embark on a
second round of expansionary monetary measures to boost growth
weighed on the dollar.
A falling dollar makes oil and other dollar-denominated
commodities cheaper for holders of other currencies.
(Additional reporting by Robert Gibbons in New York; Alex
Lawler in London; Alejandro Barbajosa in Singapore; editing by
Lisa Shumaker)
