Oil prices lifted by US fuel demand

LONDON: Oil advanced for a second day in New York on speculation the Federal Reserve will bolster efforts to stimulate the economy and as fighting continued in Libya, damping hopes the country is close to resuming crude exports.

Futures climbed as much as 1.9% as the dollar weakened, boosting the appeal of commodities as protection against inflation. Stocks and US equity-index futures rose. Brent gained 0.3% even as Goldman Sachs Group said Libya's oil production will recover more quickly than forecast after the "sudden takeover" of fields and export facilities by rebels.

A US report may show US gasoline inventories shrank last week while crude stockpiles rose. "What's really behind prices is the hope of a third round of quantitative easing," said Eugen Weinberg, Frankfurt-based head of commodities research at Commerzbank AG, who forecasts Brent crude will average $100 a barrel in the fourth quarter. "But at some point the market will need to adjust to reality."

Crude for October delivery climbed as much as $1.64 to $86.06 a barrel in electronic trading on the New York Mercantile Exchange, and was at $85.62 at 1:19 pm London time. The contract gained 2.4% on Monday. Brent oil for October settlement was at $108.77 a barrel, up 41 cents, on the London-based ICE Futures Europe exchange, after closing 0.2% lower on tuesday. The European benchmark contract was at a premium of $23.12 to U.S. West Texas Intermediate crude futures, compared with a record settlement of $26.21 on August 19.