* Gulf states in talks on replacing dollar for oil - report
* Saudi c. bank chief says report "absolutely incorrect"
* Dollar falls against euro, yen
* Market awaits U.S. crude inventory report at 2030 GMT
(Adds detail, updates prices)
By Christopher Johnson
LONDON, Oct 6 (Reuters) - Oil prices rose more than $1 to
above $71 per barrel on Tuesday, helped by a fall in the U.S.
dollar after a report Gulf Arab states were in talks to replace
the greenback with a basket of currencies in oil trading.
The report was swiftly denied by senior officials from
leading oil producers Saudi Arabia, Russia, Kuwait and the
United Arab Emirates.
Stronger stock markets, spurred by expectations of a
faster-than-expected recovery in the U.S. economy, also
bolstered oil prices. []
U.S. crude for November <CLc1> rose $1.22 to a high of
$71.63 per barrel before slipping back to around $71.41 by 1125
GMT, after gaining 46 cents to settle at $70.41 on Monday.
London Brent crude oil futures <LCOc1> also rose sharply and
were up 96 cents at $69.00 by 1125 GMT.
"I think the dollar weakness is the main reason pushing oil
prices higher today, but I can't imagine this story will support
for very long or in the coming days," said Carsten Fritsch, oil
analyst at Commerzbank.
The dollar fell on Tuesday after Britain's Independent
newspaper reported Arab states were in talks to end the use of
the dollar for oil trading. []
Quoting unnamed sources, including Gulf Arab and Chinese
banking sources, it said Gulf Arab states were in secret talks
with Russia, China, Japan and France to end dollar dealings for
oil, moving instead to a basket of currencies including the
Japanese yen and Chinese yuan, the euro, gold and a new, unified
currency planned for nations in the Gulf.
"ABSOLUTELY INCORRECT"
But Saudi Arabia's central bank chief said the report was
absolutely incorrect, while Algeria's finance minister said
there was no need for a new currency in oil trade.
[] []
Analysts said ending the use of the dollar to settle oil
trades between countries would be fairly easy, but replacing the
currency in which oil is priced would require a massive effort.
"These ideas have been talked about before but have never
yet come to anything," said David Wech, analyst at JBC Energy in
Vienna. "This may have speculative impact in the short-term
perhaps, but this is about a very long-term project."
For a snap analysis on replacing the use of the dollar for
oil deals, click on []
Dealers said oil prices appeared to be in a trading range of
$65 to $75 a barrel with little sign of a break out.
"Weak demand data is stopping prices rallying and maybe fund
support is stopping it sinking," said Christopher Bellew, oil
broker at Bache Commodities in London.
Brokers MF Global said in a note the macroeconomic
environment was weak enough to limit excessive rallies in a
number of commodity complexes, including crude.
"It will be all the more difficult for prices to push higher
on geopolitical headlines, and so the rallies we likely will
see, will be technical in nature, with questionable staying
power," MF Global said.
U.S. crude and product inventories likely rose last week,
according to a preliminary Reuters poll of analysts. []
The American Petroleum Institute will release its inventory
report on Tuesday at 2030 GMT, while the U.S. Energy Information
Administration (EIA) will publish its supply data on Wednesday.
(Additional reporting by Fayen Wong in Perth and Joe Brock in
London; editing by Keiron Henderson)
