Oil extends gains toward $70 on weak dollar

By Maryelle Demongeot

SINGAPORE (Reuters) - Oil rose towards $70 a barrel on Thursday, building on its more than 7 percent surge in the previous session, after a U.S. Fed Reserve interest rate cut led the U.S. dollar to its biggest daily fall in 23 years.

Asian stocks markets brightened after the Fed cut, with the Nikkei .N225 jumping 3.9 percent, further supporting oil. Like other commodities, oil has become more sensitive to the gyrations of the wider economy as the global financial crisis widens.

U.S. light crude for December delivery rose $2.14 to $69.64 a barrel by 2:50 a.m. British time, having gained $4.77, or 7.6 percent on Wednesday on the back of the lower greenback.

London Brent crude was up $1.98 at $67.45.

"One of the reasons oil is going up is because of these rate cuts. It may mean that we have seen a bottom in the stocks markets," said Tony Nunan, assistant manager of risk management at Tokyo-based Mitsubishi Corp.

Oil has more than halved from its record high above $147 struck in mid-July and is down by 30 percent so far this month.

The Fed cut interest rates by half a percentage point, taking its target for overnight bank lending to 1 percent, the lowest since 2004, in an attempt to lower credit and revive the sagging economy.

China also cut its interest rates on Wednesday, kicking off what is likely to be a global round of interest rate cuts, with Norway having already followed suit, and Taiwan cutting rates on Thursday for the third time in about a month.