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Oil jumps $2 on supply concerns

Business Materials 10 October 2007 00:33

( Reuters ) - Oil rose $2 to over $81 a barrel on Tuesday on concerns about consumer-nation supplies ahead of the coming Northern Hemisphere winter.

European oil product inventories fell in September, industry monitor Euroilstock reported, while the U.S. government said heating demand will be higher this year than last due to forecasts for cooler weather.

The reports helped push U.S. crude futures up $2.04 to $81.06 a barrel by 12:28 p.m. EDT, reversing Monday's big sell-off. London Brent crude gained $1.18 to $77.76.

European distillate stocks in September fell 5.25 million barrels, or 1.3 percent, from August, while gasoline stocks fell 6.80 million barrels, or 5.2 percent, from a year earlier, according to Euroilstock.

The U.S. Energy Information Administration said consumers in the world's top energy market will pay 10 percent more to warm their homes this winter than last year due to cooler weather.

"This morning's EIA report was taken as supportive for prices on the expectations for increased demand," said Eric Wittenauer, analyst at A.G. Edwards.

Adding support to commodities, the dollar fell against the euro on Tuesday after a two-day rally.

"It's also being supported by the dollar, which is giving back some of the gains it has had over recent days. That's also supporting commodities across the board, industrial metals and gold are up," Wittenauer added.

Some investors had bought crude and commodities in recent weeks as a hedge against the weaker dollar, which reached multi-year lows against other major currencies following a cut in U.S. interest rates last month.

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