Oil rose above $96 on Friday, supported by a weak dollar, but gains were limited by concerns over the U.S. economy after another bank warned of large credit losses.

U.S. crude rose 55 cents to $96.01 a barrel by 1626 GMT, off early-session highs of $96.48.

London Brent crude climbed 48 cents to $93.27.

Oil has drifted lower since hitting a record $98.62 a barrel reached on Wednesday, weighed down by doubts over the economic health of top consumer the United States after Federal Reserve Chairman Ben Bernanke highlighted the twin threats of slower growth and inflation.

The deepening global credit market crisis was highlighted by Wachovia Corp, the fourth largest U.S. bank, which revealed $1.1 billion of losses on mortgage securities in October. This helped push U.S. stocks sharply lower.

But falling fuel inventories ahead of winter and investment flows into commodities have offset these negatives.

Commodity markets should be able to hold their own in days ahead, as they will need to see evidence of a demand slowdown before they correct themselves, said Edward Meir of MF Global.

In energy's case, we seem to be regrouping...as we attempt yet again to take out the $100 mark on crude.

Latest data on oil product inventories in Europe bolstered the view that supplies are shrinking ahead of winter.

European distillate stocks, for example, fell for the fifth month in a row in October.

The fundamental supply/demand picture in the United States is also still supportive of prices.

U.S. crude oil inventories have continued to fall counter-seasonally, Barclays Capital said.

The seasonal swing in demand will put further pressure on stocks, it said. Even if OPEC raises production further in December, the effect of the increase will not be felt in consuming regions until well into the first quarter of 2008.

The weak dollar, which has helped boost the oil price, hit record lows against the euro on Friday as Bernanke's comments increased expectations of another cut in U.S. interest rates.

The dollar's slide has helped maintain the allure of crude for financial investors and speculators who have helped lift oil by 40 percent since mid-August.

Investments in commodities continue to grow, said a Bank of America research note.

With the latest estimates putting the total capital tracking commodity indexes at $150 billion.

At least nine oil and gas platforms in the Norwegian part of the North Sea had shut due to a storm overnight on Thursday, but operators were restarting fields on Friday.

(Reporting by Santosh Menon; additional reporting by Fayen Wong in Sydney)

Ben Bernanke