Oil jumps 3 percent on Ida, equities

By Edward McAllister

NEW YORK (Reuters) - Oil rose 3 percent towards $80 a barrel on Monday after Tropical Storm Ida forced the shut in of U.S. oil and gas production, helping to support prices.

U.S. crude for December delivery rose $2.34 to $79.77 a barrel by 1:50 p.m. EST (6:50 p.m. British time). London Brent crude gained $2.21 to $78.08.

Ida, the first real storm threat of the 2009 season, was downgraded from a hurricane on Monday, but production remained shut in as producers waited for the storm to pass over the Gulf.

"Crude is up on the weak dollar and the impact of Tropical Storm Ida, overshadowing some bearish news of the Saudis raising supplies available and China raising fuel prices," said Phil Flynn, analyst at PFGBest Research in Chicago.

Crude has been bolstered by stronger equities and a weaker dollar in recent months, as investors look to wider macro economic data for a hint of economic recovery and a rebound in energy demand.

U.S. stocks jumped, extending last week's gains, on renewed risk-taking sentiment after the Group of 20 pledged to keep economic stimulus in place until a recovery was assured. .N

The news also sent the dollar down across the board, helping bolster crude prices. A weak dollar makes dollar-denominated commodities like crude cheaper for holders of other currencies and helps support prices.

"I think it's more buy on the rumour, sell on the fact. It does not seem as if (Ida is) strong enough to create structural damage," said Olivier Jakob of Petromatrix.