Oil prices rose on Wednesday, as optimism surrounding economic recovery and a weaker U.S. dollar prompted investors to buy crude to hedge against inflation.

Oil prices settled higher even as OPEC ministers signaled no plans to cut oil production, and the U.S. Energy Information Administration cut its oil demand forecast this year and next.

U.S. crude for October delivery settled up 21 cents, or 0.3 percent, at $71.31 a barrel. Earlier Wednesday, prices rose to a one-month high above $72, after surging more than $5 a barrel from their lows on Friday. London Brent rose 41 cents, or 0.6 percent, to $69.83.

The dollar is weak and the stock markets are up, so we're seeing crude futures higher today, said Mark Waggoner, president of Excel Futures in Huntington Beach, California.

Equities strengthened and the U.S. dollar fell near the year's low against a basket of currencies, helping oil rise slightly even as other commodities sputtered. Investors often buy commodities such as oil to hedge against a weaker dollar. <.N>

A U.S. Federal Reserve Beige Book report Wednesday helped spur optimism in a potential economic recovery, with business people in most U.S. districts reporting a cautiously positive outlook for economic activity.

OPEC appeared ready to keep oil production targets unchanged at its Vienna meeting scheduled for 3:30 p.m. EDT Wednesday.

It is completely priced in that OPEC will leave output unchanged, said Christopher Bellew, oil broker at Bache Financial.

So far, none of the 12 OPEC members has stated any need to cut production beyond the 4.2 million barrels per day slashed since last autumn, as higher prices and signs of a strengthening world economy shift the focus away from sluggish fuel demand.

With the price ranging between $68 and $73, what else do you want? The price, everybody likes, consumers and producers, Saudi Arabian Oil Minister Ali al-Naimi told reporters when asked if OPEC needed to change its output policy.

The U.S. Energy Information Administration on Wednesday cuts its global oil demand forecast for 2009 and 2010 and upped its projections for OPEC production.

Soft demand in the United States has forced refiners such as Valero to sack hundreds of workers and idle several major processing units.

The market will get a reading on U.S. crude stocks with numbers from the American Petroleum Institute due on Wednesday at 4:30 p.m. EDT. The U.S. Energy Information Administration will release its data on Thursday at 11 a.m. EDT (1500 GMT). Both have been delayed a day by Monday's Labor Day holiday.

A Reuters poll showed analysts expected crude stocks to fall by 1.5 million barrels, distillate supplies to increase by 700,000 barrels and gasoline inventories to decline by 1.4 million barrels.

Traders were keeping an eye on Hurricane Fred, which strengthened into a powerful Category 3 storm in the eastern Atlantic Ocean on Wednesday but posed no threat to any land.

(Additional reporting by Richard Valdmanis and Gene Ramos in New York, Nick Trevethan in Singapore and Emma Farge in London; Editing by Lisa Shumaker)