BISINISS WORLD NEWS

LONDON: Oil edged up toward $80 a barrel on Wednesday as the dollar weakened and investors looked ahead to a U.S. inventory report expected to show a fall in distillates stocks and higher crude supplies.

The euro rose as a Greek government source cited details of plans to tackle Greece's debt problems. A weak dollar makes dollar-denominated commodities cheaper for other currency holders and tends to support oil prices.

U.S. crude was up 17 cents at $79.85 a barrel by 1007 GMT, trading as high as $80.06 intra-day. Brent crude was up 8 cents at $78.26.

"We're still fluctuating in a very narrow range between $78 and $80," said Carsten Fritsch, analyst at Commerzbank. "The dollar could be one driver."

"In the medium term, we expect lower prices given weak fundamentals but at the moment positive market sentiment prevails and so a break higher is still a possibility."

The U.S. government's Energy Information Administration issues its weekly inventory data at 1530 GMT. Analysts expect a 1.4 million-barrel increase in crude stocks and a 900,000-barrel drop in distillates, which include heating oil.

Oil in New York on Tuesday hit a seven-week intra-day high of $80.95. It reached $83.95 on January 11, the highest in 15 months. But it closed below $80 and $80.50 on Tuesday, levels which have capped rallies.

Some analysts see a chance that oil could move above its trading range.

"Crude oil's charts look fairly constructive," said Edward Meir at MF Global in a report. "Given that we are in shooting distance of the January 2010 highs, we cannot exclude a test of those levels."

The EIA report on U.S. inventories follows data from industry body the American Petroleum Institute (API) on Tuesday, which showed a 4.1-million-barrel drop in distillate supplies and a 2.7 million barrel rise in crude inventories.

Investors have looked to wider economic data over the past year for signs of economic recovery and a potential rebound in energy demand. The all-important U.S. non-farm payrolls data is due on Friday.

While global oil consumption is expected to return to growth in 2010 following a decline last year, producers remain cautious about the oil market's underlying fundamentals of supply and demand.

The Organization of the Petroleum Exporting Countries meets on March 17 and ministers are already suggesting there will be no change to current output targets.