* Russia outlines ceasefire plan, Ukraine dismisses it
* Dollar index eases from 14-month high
* Coming up: EIA inventory data 11:00 a.m. EDT (1500 GMT)
(Updates with API data)
By Anna Louie Sussman and Robert Gibbons
NEW YORK, Sept 3 Crude oil prices rose by more
than $2 a barrel on Wednesday off multimonth lows as the
prospect of peace talks between Ukraine and Russia combined with
strong U.S. economic data raised demand expectations.
New orders for U.S. factory goods jumped in July and
automobile sales in August were unexpectedly robust, offering
further signs of strength in the manufacturing sector.
President Vladimir Putin outlined plans for a ceasefire in
eastern Ukraine on Wednesday but Ukraine's prime minister
dismissed the proposal, while France expressed its disapproval
of Moscow's support for separatist forces by halting delivery of
After speaking to Ukrainian President Petro Poroshenko by
phone, Putin said he believed Kiev and pro-Russian separatists
could reach agreement at planned talks in Minsk on Friday.
"If the ceasefire holds, sanctions will be lifted and that
will mean more economic activity. We've gone from a situation
where we'd lowered demand expectations to rising demand," said
Phil Flynn, an analyst at the Price Futures Group in Chicago.
U.S. crude settled up $2.66 at $95.54 a barrel,
recapturing nearly all of the more than $3 it shed on Tuesday
when it neared a nine-month low. Markets were closed on Monday
for a U.S. holiday.
Brent crude rose by $2.43 to settle at $102.77 at
11:41 a.m. EDT (1541 GMT) after settling at its lowest since May
1, 2013, on Tuesday.
A weaker dollar and expectations of a decline in U.S. crude
inventories further supported oil prices, which on Tuesday had
plummeted in reaction to a sharp gain in the dollar and concerns
over slowing oil demand growth in China and Europe.
"You would expect the market to bounce after such a major
downward move yesterday," said Tony Machacek, a broker at
Jefferies in London. "Fundamentally, the oil market is well
supplied and the indications are prices are still in a
Investors have mostly discounted threats to supplies from
conflict in the Middle East and North Africa, focusing instead
on the lack of further disruption to oil flows in Iraq and
rising output in Libya.
After the session close on Wednesday, industry group the
American Petroleum Institute reported U.S. crude inventories
fell only 545,000 barrels to 361 million last week as refinery
capacity utilization fell 0.5 percentage point to 93.2 percent.
Brent and U.S. crude and U.S. gasoline and heating
oil futures all pared gains after the API released its
The more closely watched update from the government's Energy
Information Administration is due at 11:00 a.m. EDT (1500 GMT)
Thursday. It is delayed by one day due to the Monday U.S.
U.S. crude oil and refined product stockpiles were forecast
to have dropped in the week to Aug. 29, an expanded Reuters
survey of 10 analysts showed on Wednesday.
(Additional reporting by Alex Lawler and Jacob
Gronholt-Pedersen; editing by Michael Urquhart, G Crosse, Jane
Baird, Andrew Hay and Diane Craft)