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Oil gains on dollar weakness

SINGAPORE, Oct 7 – Oil rose in Asian trade Wednesday, lifted by a weak US dollar, which came under more pressure after a report that Gulf states considered dropping the greenback for oil transactions, analysts said.

New York\’s main contract, light sweet crude for November delivery, was 53 cents higher at 71.41 dollars a barrel.

Brent North Sea crude for November delivery rose 66 cents to 69.22 dollars.

"The soft tone of the US dollar supported the oil price," analysts from the Commonwealth Bank of Australia said in a report.

A weak greenback usually boosts crude prices because the dollar-denominated commodity becomes cheaper for foreign buyers holding stronger currencies.

Britain\’s Independent newspaper reported 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 immediate denial of such a plan by Saudi Arabia, Russia, the UAE, Algeria, Qatar and Kuwait.

"The US dollar fell, partly as risk appetite led to acceleration of the carry trade, and partly on media reports that Arab oil producers may switch to pricing crude in a basket of currencies rather than the greenback," said Dariusz Kowalczyk, chief investment strategist with SJS Markets financial firm.

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In Asian trade Wednesday, the dollar to 88.67 yen from 88.82 in New York late Tuesday while the euro slipped to 1.4698 dollars from 1.4715 and to 130.31 yen from 130.72 yen.

The dollar had weakened against the yen and euro in late US trades Tuesday.

Separately, traders are waiting for the release later Wednesday of a weekly oil stockpiles report by the US Department of Energy to assess the demand situation in the US economy, the world\’s biggest oil user.

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.

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