Oil steady above $ 97, weak dollar supports

LONDON, Nov 22 (Reuters) Oil steadied above a barrel on Thursday, after falling just shy of the 0 milestone the previous session, as the dollar tumbled to fresh record lows.

U.S. light crude for January delivery was up 8 cents at .37 a barrel by 1137 GMT. Oil briefly surged to a lifetime peak of .29 a barrel on Wednesday, before settling 74 cents lower.

London Brent crude rose 28 cents to .12 a barrel.

''Because of the Thanksgiving holiday it will probably be relatively quiet,'' said Simon Wardell, analyst at Global Insight.

NYMEX floor trading will be closed on Thursday for the Thanksgiving holiday, although Globex electronic trade continued as normal.

Oil has been rising inversely to the dollar over the past months amid a fever of speculative trading.

The dollar hit a record low against the euro, the Swiss franc and a basket of currencies on Thursday, as the market upped the ante on the Federal Reserve to deliver an interest rate cut next month.

A mixed U.S. inventory report cut short oil's rally towards 0 on Wednesday.

Crude stocks at the delivery point for U.S. crude futures in Cushing, Oklahoma, rose 1.2 million barrels to 14.6 million barrels last week, overshadowing an overall drawdown in U.S.

crude stocks.

''The inventory increase at this key physical delivery point of the NYMEX crude oil contract obviously caught the market somewhat flat-footed, leading to the price pullback,'' First Energy Capital said in its daily market statement.

The U.S. government showed a larger-than-expected 2.4 million-barrel drop in distillate stocks, which include heating oil and diesel fuel, ahead of chilly winter in the U.S.

northeast.

REUTERS BJR ND1738