* Oil hits highest since early May after EIA report
* Oil product inventories fall, crude stocks rise
* Fed prospects lift energy prices on demand outlook
* French refineries mull joint strike with oil port
* Coming up: U.S. jobless claims, 8:30 a.m. EDT Thursday
(Updates prices, market activity, related news)
By Gene Ramos
NEW YORK, Oct 6 (Reuters) - Crude oil ended higher for the
fifth day in six on Wednesday as a larger-than-expected
drawdown in U.S. gasoline stockpiles and a sinking dollar
prompted investors to bid up energy futures.
The weaker dollar has spurred money flows into oil and
other commodities as investors weigh growing prospects for more
U.S. monetary easing, which they see improving oil demand in
the world's biggest energy-consuming country.
U.S. crude for November delivery <CLX0> settled up 41 cents
at $83.23 a barrel, with gains pared by late profit-taking
after a surge to $84.09, the highest since May 4. In London,
ICE November Brent <LCOX0> ended up 22 cents at $85.06.
U.S. November gasoline <RBX0> gained more than 3 cents to
end at $2.1559 a gallon, after hitting an eight-week high of
$2.1650.
Data from the U.S. Energy Information Administration showed
gasoline inventories fell 2.65 million barrels last week, while
distillate stocks, which include heating oil and diesel fuel,
dropped by 1.12 million barrels.
Crude stocks rose 3.1 million barrels, 10 times more than
expected.
"The product drawdowns set the tone for the report and will
add to the sentiment that demand may be picking up again after
the lull experienced in mid- to late summer," said John
Kilduff, partner at Again Capital LLC in New York.
"It's a solid fundamental input, which adds to the
macroeconomic forces at work in the energy markets highlighted
by expectation of the coming monetary easing measures by the
U.S. Federal Reserve," Kilduff said.
The dollar fell to an eight-month low against the euro and
a 15-year low versus the Japanese yen on expectations that the
Fed would further loosen monetary policy, given a recent spate
of weak economic data. []
A weaker dollar usually lifts crude because it makes
dollar-denominated oil cheaper for consumers using other
currencies and lowers the value of dollars paid to producers.
The dollar will experience broad weakness next year as the
U.S. economic outlook has deteriorated faster than expected and
the Fed is set to announce additional easing, Goldman Sachs
said. []
U.S. ECONOMY, PORT TROUBLES
While growth accelerated in the key U.S. services sector
last month, that in China and Europe slowed, with those sectors
in Ireland and Spain tipping back into contraction. That
painted a mixed global picture, but showed the U.S. economy
steering clear of another recession. []
But U.S. labor market weakness is hobbling the economy's
recovery from its worst downturn since the 1930s, and Friday's
jobs report could determine whether the Fed will ease policy
further at its Nov. 2-3 meeting. []
In France, refinery workers may join a strike at the key
Fos-Lavera oil port on Thursday, raising prospects of a
complete shutdown of the country's oil processing and pushing
European fuel prices higher. []
European gasoline makes up a large part of northeastern
U.S. supply and the strike, in its 10th day, has pushed up cash
gasoline prices at New York Harbor. <0#P-NYH>
On the U.S. Gulf Coast, the northern part of the Houston
Ship Channel reopened to ships for the first time in three days
after a barge accident on Sunday closed the busy waterway.
[]
Tankers were heading in to resupply four large Houston-area
refineries that provide 4.9 percent of U.S. refining capacity.
(Additional reporting by Robert Gibbons in New York, David
Turner in London; Alejandro Barbajosa in Singapore; Editing by
Dale Hudson)
