Oil climbs near record above $82

By Alex Lawler

LONDON (Reuters) - Oil rose above $82 a barrel on Wednesday, closing in on a record hit the previous day after the U.S. Federal Reserve's interest rate cut raised expectations of still robust energy demand in the world's top consumer.

The Fed slashed rates by a half-percentage point on Tuesday in a bid to shield the U.S. economy from a housing slump and financial turbulence -- sparking a rally across equities and commodities.

"Now the market is going to be searching for $85 a barrel," said Tony Nunan of Mitsubishi Corp in Tokyo.

U.S. crude rose 59 cents to $82.10 a barrel by 12:04 p.m., after a gain of 94 cents on Tuesday when it hit a record of $82.38. London Brent crude gained 44 cents to trade at $78.03.

Oil -- up a third since the start of the year -- has risen on hurricane threats and other supply risks, a flow of investor money into energy from poorly performing equity markets and falling U.S. fuel inventories.

U.S. crude oil stocks are forecast to have dropped last week for the fourth straight week, sinking 2 million barrels, said analysts polled by Reuters ahead of a government report later on Wednesday.

"If we get a big drop in inventories, like three to seven million, then prices could get there ($85) in a hurry," Nunan added.

Gasoline inventories probably dropped for a seventh week running, given strong demand and lower output after three Texas refineries were shut temporarily due to Hurricane Humberto.