Oil rises above $83 on weaker dollar, supply drop

Oil prices rose above $83 a barrel Thursday, pushed higher by the U.S. dollar's slide and signs that demand may be improving.

By early afternoon in Europe, benchmark crude for November delivery was up 29 cents to $83.30 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.34 to settle at $83.01 on Wednesday.

Investors have moved into oil and other commodities this week amid mounting market speculation that the Federal Reserve is preparing new measures to spur the U.S. economy, including a lowering of long-term interest rates. That expectation has weakened the dollar, which is used to buy and sell oil, and investors holding other currencies can buy more crude when the dollar falls.

"We look for the financial markets to keep pricing in a very aggressive effort toward monetary easing that should keep energy in high demand as an asset class," Ritterbusch and Associates said in a report.

Also, the American Petroleum Institute said late Wednesday that crude inventories fell 4 million barrels last week — an unexpected drop that suggested demand may be growing.

OPEC oil ministers meeting Thursday were expected to keep output targets unchanged, indicating they are happy with prices which have stayed within a range of around $75-$85 per barrel in recent months.

JBC Energy Research noted that better demand may not send prices higher in the short term.

"The upward adjustments clearly reflect the stronger-than-expected demand path observed particularly during the third quarter. However, currently healthy non-OPEC production levels together with OPEC's massive spare capacity should be enough to dismiss any bullish hopes of noticeably tightening supplies in the foreseeable future," JBC said in a report.

The Energy Department's Energy Information Administration reports its weekly supply data later Thursday.

In other Nymex trading in November contracts, heating oil rose 0.34 cent to $2.3041 a gallon and gasoline gained 0.13 cent to $2.1674 a gallon. Natural gas fell 5.6 cents to $3.64 per 1,000 cubic feet.

In London, Brent crude added 22 cents to $84.86 a barrel on the ICE Futures exchange.