SINGAPORE, Sep 28 Oil extended gains for a third day on Friday to above $ 83 a barrel, ne

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SINGAPORE, Sep 28 (Reuters) Oil extended gains for a third day on Friday to above $83 a barrel, nearing its record high as a weak dollar and pre-winter supply worries fuelled fund buying.

U.S. crude for November delivery rose 30 cents to $83.18 a barrel by 0145 GMT, after gaining $2.58 or 3.24 percent in the previous session. Oil was recovering from a profit-taking dip earlier this week that pulled prices off their $83.90 peak.

London Brent crude rose 30 cents to $80.33 a barrel.

''On a macro level people are clearly buying crude oil as a hedge against a weaker dollar. The crude market is structually very solid,'' said a hedge fund manager based in Asia.

The dollar hit an all-time low against a basket of currencies on Thursday on concerns over a slowdown in the U.S. housing sector. The weak dollar, which can strengthen the nominal values of commodities traded in the currency, also boosted metals.

The return of a backwardated structure in the crude market -- in which prompt oil is more expensive than oil further in the future -- is also drawing more investors who can profit by rolling long positions from one month to the next.

The premium of front-month U.S. crude to the second month last week rose to above $1.50, the highest since early 2003, just before a wave of long-term investors ploughed over $100 billion into commodity markets. It was at $1.40 on Friday.

''Right now many speculators and investors are looking into the energy market, lots of new money is pouring into energy funds,'' said Kentaro Obata, Tokyo-based trading director at Astmax.

Analysts are also concerned that continued robust demand in the United States and other consumer nations could tighten up world stockpiles when cold weather hits the northern hemisphere.

''In terms of inventories to demand, the ratio is getting smaller and we're seeing a bullish impact on prices,'' said ANZ analyst Andrew Harrington.

U.S. distillate supplies, which include heating oil, are running more than 7 percent below year-ago levels, while Japanese supplies of kerosene, used as a home heating fuel, are more than tenth below 2006 levels, data showed this week.JAPAN1] The Organisation of Petroleum Exporting Countries agreed earlier this month to hike oil output by 500,000 barrels per day to soothe fears of a winter crunch, but many traders said the increase was too little.

Persistent fears of supply disruptions during the rest of the hurricane season were also supporting gains, dealers said, but tropical storm Lorenzo -- forecast to become a hurricane before slamming into Mexico -- is unlikely to affect production.

Meanwhile, in Nigeria gunmen disguised as soldiers killed one foreign oil worker and abducted another on Thursday -- underscoring the supply risks from the world's eighth largest oil exporter.

REUTERS SG BD0838

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