Oil up 7 pct on weak dollar

Oil jumped more than 7 percent percent on Wednesday as the dollar fell after the Federal Reserve cut U.S. interest rates.

The Fed cut interest rates half a percentage point, taking its target for overnight bank lending to 1 percent, the lowest since 2004.

European and Asian stock markets ended higher while U.S. stocks gyrated in highly volatile trade after the rate cut, amid signs the myriad central bank and government efforts to shore up credit markets were starting to work.

U.S. crude rose $4.77, or 7.6 percent, at $67.50 a barrel, then rose further to hit $68.28 in post-settlement trade.

London Brent crude settled up $5.18 a barrel at $65.47.

"I don't think it has a direct impact on oil demand, I don't expect it to put more cars on the road or make the coming winter colder so I'm not really looking for a direct impact on petroleum use," said Tim Evans, energy analyst for Citi Futures.

"What it may do is perhaps weaken the US dollar, perhaps support the stock market, and those would be supportive factors for oil prices."

The global financial crisis has hit oil demand. Crude prices have tumbled from record highs over $147 a barrel struck in July after investors poured cash into oil and other commodities as a hedge against inflation and the slumping greenback.

The dollar extended losses against the euro on Wednesday after U.S. stocks rallied following the Fed's rate cut.