Oil prices rise above 71 dollars

LONDON: Oil prices climbed above 71 dollars on Wednesday ahead of key US energy inventory data, extending gains won a day earlier on a report that Gulf states considered dropping the greenback for oil transactions.

New York's main contract, light sweet crude for November delivery gained 47 cents to 71.35 dollars a barrel.

Brent North Sea crude for November delivery added 53 cents to 69.09 dollars a barrel in London trade.

Britain's Independent newspaper reported on Tuesday that Gulf countries had held secret meetings with officials outside the region to discuss dropping the dollar for oil trade.

The countries would instead use a basket of currencies, including the yen, the paper said, citing Gulf Arab and Chinese banking sources in Hong Kong.

The report increased recent negative sentiment toward the dollar despite a series of denials, the latest by France. The French economy ministry described the report as "pure speculation" on Wednesday.

The Independent had reported that Gulf states, together with China, Russia, Japan and France, were considering replacing the dollar.

Separately, traders were awaiting the release on Wednesday of a weekly oil stockpiles report by the US Department of Energy (DoE) to assess the demand situation in the United States, the world's biggest oil consuming nation.

Analysts polled by Dow Jones Newswires said they expected crude stocks to rise by 1.7 million barrels in the week to October 2, while gasoline reserves are seen to increase by 600,000 barrels.

The DoE's weekly inventory report is expected to show that "crude and product inventories probably rose last week," said Mike Fitzpatrick of MF Global.

Demand for oil has plunged amid the world economic downturn, the most severe since the 1930s. Oil prices tumbled from historic highs of more than 147 dollars in July 2008 to about 32 dollars in December because of global recession.

Prices have since recovered but investors remain concerned over the pace of the upturn.

Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah on Tuesday predicted that oil prices would remain at 60-80 dollars a barrel, as he also denied The Independent report.

"Over the last two weeks, crude oil rebounded from a nine-week low near 65 dollars to around the 72-dollar level, amid some better than expected (economic) data from the US and Asia," analysts at Sucden Financial Research said on Wednesday.