* G20 finance ministers meet in South Korea on currencies
* German Ifo sentiment index hits 3-1/2 yr high in Oct
* Coming up: U.S. weekly ECRI index at 1430 GMT
(Recasts, previous SINGAPORE)
By Emma Farge
LONDON, Oct 22 (Reuters) - Oil prices held near $81 a barrel
on Friday as positive German data fuelled demand growth
expectations as the market awaits a G20 finance ministers'
decision on currencies.
German business sentiment was the strongest in 3-1/2 years
in October, data showed on Friday, suggesting the recovery of
Europe's largest economy may hold up better than expected.
[]
A G20 finance ministers meeting in South Korea looked
unlikely to reach a deal on a U.S.-led initiative aimed at
commiting emerging markets to cut current account surpluses and
allow their currencies to rise. []
U.S. crude <CLc1> rose 48 cents to $81.04 a barrel by 1003
GMT, reversing part of Thursday's drop of more than 2 percent.
ICE Brent <LC0c1> rose 73 cents to $82.66 a barrel by the
same time.
"Today's Ifo underlines that the German good-news-show is
continuing and is more than just a rebound or a pure statistical
effect. The broadening of the recovery will continue," said
Carsten Brzeski, ING Financial Markets.
Refinery outages in France are also supported the oil
complex on Friday with unions signalling their determination to
keep fighting even if President Nicolas Sarkozy's unpopular
pension reform becomes law on Friday. []
The move higher came despite a steady dollar, with some
analysts suggesting a temporary snap in the strong inverse
correlation between oil and the dollar.
Weakness in the dollar this month has stoked buying interest
among buyers holding other currencies and investors looking for
a hedge against cash.
Edward Meir at MF Global, said: "It seems investors are
unsure about how much longer the short-dollar/long commodity
trade remains in vogue."
Other analysts thought a failure to reach a deal in South
Korea could further weigh on the dollar and reinforce the
negative correlation.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on the correlation between oil and gold's
correlation to the dollar:
http://graphics.thomsonreuters.com/AS/0810/ABE_20102210125914.jpg
Graphic showing oil's technical outlook:
http://graphics.thomsonreuters.com/WT/20102210072425.jpg
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
STIMULUS MEASURES
A batch of U.S. data on Thursday pointed to slow-growth in
the world's top oil consumer, reinforcing views the Federal
Reserve will ease monetary policy further next month in an
attempt to jumpstart the economy.
New claims for jobless benefits dropped last week but
remained at levels suggesting little improvement in the
distressed labour market.
Other reports showed only a modest rise in a gauge of future
U.S. economic activity and a small gain in factory activity in
the country's Mid-Atlantic region.
"The general consensus is that more QE (quantitative easing)
will be approved, which, in turn, is expected to reduce
unemployment and boost demand," said Tamas Varga at oil broker
PVM.
Traders are expected to watch closely the result of the
weekly U.S. ECRI -- a leading economic index at 1430 GMT -- for
further clues about the pace of economic growth in the world's
largest oil consumer.
(Reporting by Emma Farge and Alejandro Barbajosa in
Singapore; editing by William Hardy)
