Oil extends gains on dollar weakness

Oil rose in Asian trade today, 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 55 cents higher at $71.43 a barrel.

Brent North Sea crude for November delivery rose 59 cents to $69.15.

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

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

Britain's Independent newspaper yesterday reported 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 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.