* Report says Gulf states consider replacing dollar for oil
* Saudi c. bank chief says report "absolutely incorrect"
* U.S. EIA raises forecast for 2010 world oil demand
* Market awaits U.S. crude inventory report at 2030 GMT
(Updates prices, detail throughout)
By Christopher Johnson
LONDON, Oct 6 (Reuters) - Oil prices rose above $71 per
barrel on Tuesday as the dollar slipped against major currencies
and after a U.S. government agency raised its forecast of world
oil demand for the fourth quarter.
The dollar fell after a report in Britain's The Independent
newspaper that Gulf Arab states were in talks to replace the
U.S. unit with a basket of currencies for oil trading.
The report was swiftly denied by senior officials from
leading oil producers Saudi Arabia, Russia, Kuwait and the
United Arab Emirates but still helped push up the dollar against
a range of major currencies. [] <.DXY> []
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 $71.20 by 1257
GMT. Brent crude <LCOc1> was up 80 cents at $68.84.
"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.
Quoting unnamed sources, including Gulf Arab and Chinese
banking sources, The Independent 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.
[] []
Because oil is denominated in dollars for global trading, it
tends to go up when the U.S. currency falls as the commodity
becomes cheaper for holders of other currencies.
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 []
Also supporting oil on Tuesday was the monthly energy
forecast from the U.S. Energy Information Administration, which
raised its outlook for world oil demand at the end of this year
as the economy improves in China and other Asian countries.
The agency said it expected a 410,000 barrel per day
increase in demand in the fourth quarter of 2009 from the same
period a year ago. A previous forecast estimated just a 240,000
bpd rise in fourth quarter demand. []
The EIA also raised its forecast for OPEC and non-OPEC crude
oil production for next year. []
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.
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 Joe Brock; editing by Keiron Henderson)
